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Section 240.14a-101 Schedule 14A.
Information required in proxy statement.
Schedule 14A Information
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [ ]
Filed by a party other than the Registrant [X]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
PENNZOIL COMPANY
.................................................................
(Name of Registrant as Specified In Its Charter)
GUY P. WYSER-PRATTE
.................................................................
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction
applies:
............................................................
(2) Aggregate number of securities to which transaction
applies:
.......................................................
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the amount
on which the filing fee is calculated and state how it was
determined):
.......................................................
(4) Proposed maximum aggregate value of transaction:
.......................................................
(5) Total fee paid:
.......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
.......................................................
(2) Form, Schedule or Registration Statement No.:
.......................................................
(3) Filing Party:
.......................................................
(4) Date Filed:
.......................................................
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SOLICITATION OF PROXIES
IN CONNECTION WITH THE
1998 ANNUAL MEETING OF SHAREHOLDERS
OF
PENNZOIL COMPANY
--------------------
PROXY STATEMENT
OF
MR. GUY P. WYSER-PRATTE
Wyser-Pratte & Co., Inc.
63 Wall Street
New York, New York 10005
(212) 495-5350
--------------------
This Proxy Statement and the accompanying GOLD Annual Meeting proxy card
are furnished in connection with the solicitation of proxies by Guy P.
Wyser-Pratte ("Wyser-Pratte") of Wyser-Pratte & Co., Inc. ("WPC") to be used at
the annual meeting of shareholders of Pennzoil Company, a Delaware corporation
("Pennzoil" or the "Company"), to be held at on , at local
time, and any adjournments or postponements thereof (the "Annual Meeting"). This
Proxy Statement and the enclosed proxy card are first being sent to shareholders
on or about , 199[ ]. The solicitation is being made by Wyser-Pratte
on behalf ofWyser-Pratte and WPC.
REASONS FOR SOLICITATION
On November 17, 1997 Union Pacific Resources Group Inc. ("UPR")
terminated its all cash $84 per share tender offer to acquire Pennzoil. This
action follows the continued rejection by Pennzoil's board of UPR's tender offer
and its offers to negotiate a value maximizing transaction. The Pennzoil board
unilaterally adopted this "just say no" defensive policy despite the fact that
nearly 62% of the Pennzoil shares were tendered in July into the initial UPR $84
per share tender offer for 50.1% in cash and the balance in stock. That offer
was subsequently improved on October 6, 1997 to $84 per share cash for all
shares (and was accompanied by a proposal to allow the Pennzoil shareholders to
benefit directly from any increase in the value of Pennzoil's international
exploration and production assets above $600 million).
The termination of the UPR offer was a response to the Pennzoil board's
uncompromising rejection of UPR's proposal to negotiate an acquisition of the
Company.
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While UPR's public statements about the termination of the offer have also
referred to events indicating a possible reduction in the value of Pennzoil's
international assets, Wyser-Pratte believes that these developments would not
have affected the UPR offer if the Pennzoil board had promptly accepted the
offer or entered into negotiations with UPR.
The termination of the UPR offer, resulting from the Pennzoil board's
unilateral decision to block the offer, had an immediate and dramatic effect on
the Pennzoil stock price, as well as on Pennzoil shareholders who wanted to
accept the offer. The closing price of the Pennzoil stock on the New York Stock
Exchange on November 10, 1997, the day before UPR announced that the offer might
be terminated, was $75.50. On November 11, 1997, the day UPR announced that its
offer might be terminated, the closing stock price was $67.75. Table 1 below
shows clearly this damaging effect on the Pennzoil stock price:
TABLE 1
Value Lost due to the Termination of the UPR Offer
<TABLE>
<CAPTION>
Per Share Total Market Value % Value Lost
<S> <C> <C> <C>
Pennzoil's Stock Price of $67.75
on 11/11 Relative to Closing
Price of $75.50 on 11/10: $ (7.75) $ (365.8) million -10.26%
Pennzoil's Stock Price of $67.75
on 11/11 Relative to UPR's $84
Tender Offer: $ (16.25) $ (873.2) million -19.30%
</TABLE>
Wyser-Pratte believes that the board's response to the UPR offer
demonstrated a breakdown in Pennzoil's corporate governance system. In Mr.
Wyser-Pratte's opinion, the ultimate decision about accepting a premium offer to
acquire a company should be made by the shareholders, who own the company and
have the most to lose from a bad decision about the offer. The directors, by
contrast, are merely the shareholders' representatives. Wyser-Pratte believes
that when a premium offer is made, the board should investigate the offer and
fully inform the shareholders of the board's views regarding the offer. Then if
the shareholders want the company to be sold, the board should attempt to get
the highest possible price for the company's shares.
Wyser-Pratte believes that if the directors own a large amount of stock
in the company, there is some basis for the shareholders to rely on the board to
act in the shareholders' best interests. That safeguard is lacking, however, in
a company like Pennzoil where the directors own an insignificant amount of stock
(a total of 1.9% of the Common Stock or approximately .75% of the Common Stock
without taking into
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account such individuals' stock options, according to the Company's 1997 Proxy
Statement). When the directors have such a small stake in the company, it
becomes even clearer that good corporate governance requires the board to follow
the shareholders' lead in deciding whether to oppose a takeover bid.
The Pennzoil board failed to live up to these standards in their
response to the UPR offer. The Pennzoil shareholders demonstrated their support
for a sale of the Company by tendering nearly 62% of their shares in July to
UPR. While the shareholders were just saying "yes," however, the board was just
saying "no." The Pennzoil board did everything in its power to repel UPR. By
repeatedly rejecting UPR's requests for negotiations, the Pennzoil board showed
that it was not trying to improve UPR's offer, but was seeking to drive UPR
away. Nor is there any evidence that Pennzoil tried to find a buyer who would
offer more than UPR.
Wyser-Pratte believes that the Pennzoil board failed to give the
Pennzoil shareholders an adequate explanation of why the board rejected the UPR
offer and demonstrated a shocking lack of regard for the opinion of the Pennzoil
shareholders. The board claimed to base ITS rejection of the UPR offer on its
belief that the Pennzoil "Strategic Plan" (the "Plan") would create greater
value for shareholders than UPR's $84 per share cash offer. Yet the board never
disclosed the contents of that Plan to the Company's shareholders.
Wyser-Pratte believes these actions show that the present board cannot
be relied upon to follow the shareholders' wishes in responding to a proposal to
acquire Pennzoil, and that a change of policy at Pennzoil is required to repair
the Company's corporate governance system. The Pennzoil shareholders should
replace these directors and/or put in place mechanisms that prevent the board
from summarily blocking a premium acquisition proposal that is favored by the
majority of the Company's shareholders.
Wyser-Pratte is, therefore, soliciting proxies to adopt a series of
proposals to amend the Company's bylaws to limit the power of the board of
directors to block acquisition proposals favored by a majority of the
shareholders, and to increase the shareholders' ability to replace the board.
These proposals would:
-- Adopt a "Shareholder Rights Bylaw" that sets a time limit on the
board's use of the Company's "Poison Pill" against certain offers unless such
continued use is approved by shareholders.
-- Adopt a "Shareholder Interests Protection Bylaw" that would require
a unanimous vote of all the directors for "Defensive Actions" by the board
unless such Defensive Actions have been approved by shareholders. "Defensive
Actions" would be defined to include (1) any action by the board with the
purpose or effect, in whole or in part, of impeding a change in control of the
Company, or (2) the expenditure of any
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corporate funds on a proxy contest against a shareholder unless the Company
agreed to reimburse the shareholder's costs if 10% of the Company's shares were
voted in favor of any of the shareholder's proposals. If Mr. Wyser-Pratte is
elected to the board, as proposed below, Mr. Wyser-Pratte's vote would be
required for the company to take any Defensive Actions.
-- Allow the holders of 10% of the Company's shares to call a special
meeting of shareholders. One of Wyser-Pratte's principal purposes in offering
this proposal is to enable shareholders to call a special meeting to remove
all or a majority of the board of directors for cause if the directors fail to
discharge their fiduciary duties or reject an acquisition proposal that is in
the best interests of the corporation.
-- Allow shareholders to submit proposals and director nominations for
the annual meeting between 60 and 120 days in advance of the anniversary of the
prior annual meeting (rather than the present 90 to 120 days). A shareholder who
has made such a proposal or nomination would be permitted to amend such proposal
or add new proposals up to ten days before the meeting date and to substitute
nominees at any time up to and including the meeting.
-- Require the vote of a majority of the outstanding shares to change
any of the foregoing bylaws.
-- Elect not to be governed by Section 203 of the Delaware General
Corporation Law, which limits the Company's ability to engage in business
combinations with certain shareholders and their affiliates.
-- Repeal any bylaws adopted by the board of directors after
November 1, 1997.
In addition, Wyser-Pratte is soliciting proxies to elect Mr.
Wyser-Pratte to the board of directors and to adopt a resolution recommending
that the Company reimburse Wyser-Pratte's expenses in connection with this proxy
solicitation.
PLEASE SUPPORT OUR EFFORTS TO REFORM THE COMPANY'S CORPORATE GOVERNANCE
SYSTEM. YOU ARE URGED TO VOTE IN FAVOR OF THESE PROPOSALS BY PROMPTLY SIGNING,
DATING AND MAILING THE GOLD PROXY CARD IN THE POSTAGE-PAID ENVELOPE PROVIDED.
ONLY YOUR LATEST-DATED PROXY WILL COUNT AT THE ANNUAL MEETING,
THEREFORE, DO NOT SIGN ANY PROXY THAT MANAGEMENT MAY DELIVER TO YOU.
If you have any questions concerning this Proxy Statement or need
assistance in voting your Common Stock, feel free to call our proxy solicitor,
- ----------. (the "Proxy
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Solicitor") toll-free at or Eric Longmire, Senior Managing
Director of WPC, at (212) 495-5357.
BACKGROUND AND RECENT EVENTS
A. TENDER OFFER
On June 23, 1997, UPR through a wholly-owned subsidiary, Resources
Newco, Inc., offered to purchase 50.1% of the outstanding common shares of
Pennzoil for $84 in cash per share. In its Schedule 14D-1 ("Tender Offer
Statement") filed with the SEC, UPR announced that the tender offer was the
first part of a proposed two-step transaction to acquire Pennzoil. In the second
step of the transaction, UPR proposed to exchange the remaining Pennzoil shares
for shares of UPR common stock designed to have a value of $84 per share.
On July 1, 1997, the Pennzoil Board of Directors filed a Schedule 14D-9
in which it urged its shareholders to reject the offer. The Board described the
offer as "inadequate and not in the best interests of the company and its
stockholders." The Board further stated that UPR's proposal "does not reflect
the inherent value of Pennzoil" and that "continued pursuit of Pennzoil's
strategic plan will produce greater value for Pennzoil shareholders than UPR's
proposal."
UPR's offer was scheduled to expire on July 21, 1997. On July 22, 1997,
UPR announced that 61.5% of Pennzoil's outstanding shares had been tendered and
that the offer would be extended until September 24, 1997. UPR later extended
the offer until October 29, 1997.
On October 7, 1997, UPR amended its original offer and proposed to
purchase all of Pennzoil's shares (rather than 50.1% of the fully diluted
shares) at a price of $84 per share in cash. UPR announced that if the revised
offer were successful, UPR intended to effect a merger with Pennzoil in which
each outstanding share not tendered in the offer would be converted to $84 in
cash. The revised offer was scheduled to expire on November 5, 1997, but UPR
later extended the revised offer until November 24, 1997.
The Pennzoil Board rejected the amended offer on October 14, 1997, again
characterizing the offer as "inadequate." The Board reaffirmed its faith in
Pennzoil's strategic plan and reiterated its view that "the Company's and its
stockholders' interests would be best served if the Company remains an
independent company."
On November 11, 1997, UPR announced that it would terminate the all-cash
offer on November 17, 1997, unless Pennzoil entered into good faith negotiations
with UPR and demonstrated that "the value of Pennzoil as a whole has not
declined." In a press release, Jack L. Messman, Chairman and CEO of UPR, stated
that because the value of Pennzoil's international oil and gas assets "appears
to have eroded sharply" and because
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Pennzoil still refused to negotiate, "it is not in the best interests of our
shareholders to continue to pursue our offer on an unsolicited basis for an
indeterminate period."
Within hours of UPR's announcement, Pennzoil issued a press release
stating that it had "no plans to negotiate with UPR" and that UPR's disparaging
statements about Pennzoil were "nothing more than sour grapes." Pennzoil
restated its opinion that the UPR offer was inadequate and not in the
stockholders' best interests. "Pennzoil believes that its own programs and
projects will deliver greater value to Pennzoil shareholders than UPR's offer,"
the company said.
On November 12, 1997, Wyser-Pratte issued a statement calling on the
Pennzoil Board to negotiate with UPR and asking UPR to delay its November 17
deadline for Pennzoil to begin negotiating with UPR. Wyser-Pratte said: "We
believe that this board is ignoring the clear wishes of its shareholders.
Therefore, we have demanded from Pennzoil a copy of the shareholder list in
order to communicate with shareholders regarding ways of persuading the board to
negotiate with Union Pacific Resources."
UPR terminated its offer on November 17, 1997.
B. LITIGATION
In connection with the tender offer, UPR and Pennzoil have been engaged
in a number of lawsuits in various jurisdictions. A summary of certain
proceedings relating to these actions follows.
The Texas Litigation. On June 23, 1997, in U.S. District Court for the
Northern District of Texas, Fort Worth Division, UPR filed an action titled
Union Pacific Resources Group Inc. et al. v. Pennzoil Co., Civil Action No.
497-CV-509-Y (the "Texas Litigation"). UPR asked the court to declare that the
Schedule 14D-1 which UPR had filed with the SEC complied with all applicable
securities laws.
This action was one of three lawsuits filed by UPR on the same day. In a
press release issued on June 23, 1997, UPR stated that all three filings were
part of its strategy to "ensure that Pennzoil's Board of Directors does not
prevent Pennzoil shareholders from realizing the substantial premium value UPR
is offering for Pennzoil shares."
On June 25, 1997, UPR amended its complaint to allege that Pennzoil had
violated securities laws by making public statements recommending against the
tender offer without first filing a Schedule 14D-9 with the SEC. Several weeks
later, after Pennzoil had filed its Schedule14D-9, UPR amended its complaint to
allege that the Pennzoil 14D-9 contained false and misleading statements.
On June 25, 1997, meanwhile, Pennzoil had filed a lawsuit in the U.S.
District Court for the District of Delaware making similar allegations of
securities law violations
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against UPR. Specifically, Pennzoil claimed that UPR's Schedule 14D-1 contained
false and misleading statements.
On June 26, 1997, UPR asked the Texas federal district court to prohibit
Pennzoil from prosecuting the Delaware lawsuit on the ground that both the
Delaware and Texas actions involved the same subject matter and UPR had filed
its lawsuit first. On June 27, 1997, Pennzoil responded to UPR's argument by
asking the Texas court to dismiss the Texas Litigation in favor of Pennzoil's
action in Delaware.
On July 18, 1997, the Texas federal district court denied Pennzoil's
motion to dismiss the Texas Litigation. The court ruled that because the two
cases shared common subject matter and because UPR had filed its lawsuit first,
the Texas proceeding had priority. The court partially granted UPR's motion for
a preliminary injunction by prohibiting Pennzoil from pursuing its Delaware
lawsuit or any similar litigation until the Texas action had been adjudicated.
On September 15, 1997, UPR filed a motion for a preliminary injunction
to compel Pennzoil to disclose the strategic plan upon which it had relied in
rejecting the tender offer. Wyser-Pratte asked the court for permission to file
an amicus curiae brief in support of UPR's motion. The court denied
Wyser-Pratte's request.
On September 22, 1997, Pennzoil filed a lawsuit in the District Court of
Dallas County, Texas (the "Dallas County Action") against Smith Barney, Inc.
("Smith Barney"), UPR's financial advisor. Pennzoil claimed that Smith Barney
had wrongly used privileged Pennzoil documents while providing financial advice
to UPR, and it asked the court to enjoin Smith Barney from acting as UPR's
financial advisor. Pennzoil asserted that Smith Barney's actions violated a
confidentiality agreement between Pennzoil and UPR (the "Stipulation and Order"
or "Stipulation") designed to facilitate discovery in the numerous lawsuits
between the parties. The Stipulation provided that confidential documents would
be provided only to each side's attorneys for the sole purpose of litigation,
and that in no case were such documents to be provided to the parties themselves
or to their business advisors. As UPR's advisor, Smith Barney had signed a
separate agreement to be bound by the Stipulation. In the Dallas County Action,
Pennzoil claimed that Smith Barney had improperly received highly confidential
information relating, among other things, to Pennzoil's strategic plan.
On October 2, 1997, the court in the Dallas County Action ruled that
Pennzoil should file its claim against Smith Barney, if at all, in the context
of the Texas Litigation.
Pennzoil did so on October 14, 1997, filing an action in the Texas
Litigation seeking a permanent injunction against the tender offer. Smith Barney
was named as a third-party defendant. Expanding on the allegations made in the
Dallas County Action, Pennzoil claimed that both UPR and Smith Barney had used
confidential Pennzoil documents to draft UPR's revised tender offer, in direct
violation of the Stipulation. "Under long-established principles of federal
securities laws," Pennzoil argued, "UPR is
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barred from buying or selling Pennzoil stock so long as it possesses material
inside information regarding Pennzoil." Pennzoil sought to prohibit both UPR
from pursuing the tender offer and Smith Barney from trading in Pennzoil stock.
The Delaware Chancery Court Litigation. On June 23, 1997, in the Court
of Chancery of the State of Delaware in and for New Castle County, UPR filed an
action captioned Union Pacific Resources Group Inc. et al. v. Pennzoil Co. et
al., Civil Action No. 15755 NC (the "Delaware Chancery Court Litigation"). In
this complaint, UPR asked the court to compel the Pennzoil Board to lift its
anti-takeover defenses. UPR argued that these defenses, including a shareholder
rights plan ("poison pill"), would unlawfully prevent Pennzoil shareholders from
participating in the tender offer.
Pennzoil filed an answer on June 27, 1997. On October 24, 1997, Pennzoil
asked the court to declare that the Pennzoil Board's decisions not to lift the
company's anti-takeover defenses in response to UPR's tender offer had been
reasonable and had not constituted a breach of any duty under Delaware law.
On October 28, 1997, in the context of a discovery dispute, the Delaware
court refused to order Pennzoil to turn over documents sought by UPR on the
ground that Smith Barney had already received confidential information on
Pennzoil. According to a report published in the Wall Street Journal on October
30, 1997, the court ruled that Smith Barney could not act as both a litigation
adviser and as a financial adviser to UPR. The court denied UPR's request for
reconsideration of this ruling on November 5, 1997.
The Louisiana Litigation. On June 23, 1997, in U.S. District Court for
the Middle District of Louisiana, UPR filed an action styled Union Pacific
Resources Group Inc. et al. v. Pennzoil Co. et al. (the "Louisiana Litigation").
UPR asked the court to declare that a Louisiana anti-takeover statute was
unconstitutional, both on its face and as applied to the UPR offer.
The Delaware Federal Court Litigation. On June 25, 1997, in the U.S.
District Court for the District of Delaware, Pennzoil filed an action styled
Pennzoil Co. v. Union Pacific Resources Group, Inc. et al., Civil Action No.
97-353 (the "Delaware Federal Court Litigation"), claiming that UPR's Schedule
14D-1 contained false and misleading statements. Pennzoil asked the court to
prohibit UPR from making false and misleading statements, to direct UPR to
correct the alleged misrepresentations, and to enjoin UPR from purchasing any
Pennzoil stock until at least 30 days after such corrections were disseminated.
On July 2, 1997, UPR filed an answer and moved to dismiss the case on
several grounds, including that Pennzoil's claim was a compulsory counterclaim,
if at all, in the Texas Litigation. The Texas Litigation had been filed two days
before Pennzoil's action in Delaware federal district court and also involved
alleged violations of the securities laws.
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On July 18, 1997, the court in the Texas Litigation ruled that because
UPR had filed its lawsuit first, the Texas action had priority. Accordingly, the
court prohibited Pennzoil from pursuing the Delaware Federal Court Litigation,
or any other lawsuit involving similar issues, until the Texas Litigation had
been adjudicated.
The Class Action Lawsuits. In June and July of 1997, in Delaware
Chancery Court, six Pennzoil shareholders filed separate class action lawsuits
(the "Class Action Lawsuits") against Pennzoil and its Board of Directors. Each
suit alleged that the Pennzoil Board had breached its fiduciary duties to
shareholders by rejecting the UPR offer, and asked the court to direct the Board
to cooperate with UPR while seeking to maximize value to shareholders.
The Garfinkle Litigation. On October 21, 1997, in U.S. District Court
for the Northern District of Texas, Fort Worth Division, two Pennzoil
shareholders filed a lawsuit titled Garfinkle et al. v. Pennzoil Co., Civil
Action No. 4-97-CV-882-A (the "Garfinkle Litigation"). The suit alleged, among
other things, that the Schedule 14D-9 filed by Pennzoil in response to UPR's
revised tender offer contained material misstatements and omissions. The
complaint stated in part:
The Revised Schedule 14D-9 states that the Pennzoil directors
have concluded that the Revised Tender Offer "does not reflect
the long-term values inherent" in Pennzoil. However, the Revised
Schedule 14D-9 fails to disclose the amount or range or [sic]
such long-term values or when such values can be expected to be
realized by Pennzoil stockholders, or if no quantification was
made, the reason why.
The Revised Schedule 14D-9 refers to the Pennzoil Board's
consideration of presentations by Pennzoil management as to
Pennzoil's "prospects for future growth, profitability and share
price appreciation, as reflected in Pennzoil's strategic plan."
However, the Revised Schedule 14D-9 fails to disclose meaningful
detail regarding the supposed prospects for future growth,
profitability, and share price appreciation, including the amount
or range thereof and when such profitability and share price
appreciation can be expected to be realized by Pennzoil
stockholders.
The plaintiffs asked the court to compel Pennzoil to amend its 14D-9 and
to provide complete and accurate information.
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YOU HAVE A SAY IN THE FUTURE OF YOUR INVESTMENT
EXERCISE THAT RIGHT AND VOTE FOR THE SHAREHOLDER RIGHTS
BY-LAW PROPOSAL
PROPOSAL TO AMEND THE BY-LAWS TO SET A TIME LIMIT ON THE USE OF THE COMPANY'S
"POISON PILL" AGAINST CERTAIN OFFERS UNLESS SUCH CONTINUED USE IS APPROVED BY
SHAREHOLDERS (ITEM 1 ON PROXY CARD)
SHAREHOLDERS ARE ASKED TO CONSIDER AND VOTE UPON THE PROPOSAL TO AMEND
THE BY-LAWS TO SET A TIME LIMIT ON THE USE OF THE COMPANY'S "POISON PILL"
AGAINST CERTAIN OFFERS UNLESS SUCH CONTINUED USE IS APPROVED BY SHAREHOLDERS:
"RESOLVED, that the Shareholders hereby amend the Company's By-laws by
adding a new Article IX, which shall read as follows:
`If an Offer is made to purchase all of the Common Stock, the Board of
Directors shall Withdraw the Poison Pill at the end of the ninetieth day after
such Offer is first published or sent to security holders unless the Board of
Directors is instructed not to Withdraw the Poison Pill by a vote of a majority
of the votes which all shareholders are entitled to cast (i.e., by the vote of
a majority of the outstanding shares entitled to vote) at a meeting of
shareholders which is held on or before such ninetieth day, which meeting has a
Conforming Record Date (as defined below); provided, however, that the Board of
Directors shall not be required to Withdraw the Poison Pill at the end of such
ninetieth day unless at such time such Offer has an expiration date which is at
least ten business days thereafter. "Withdraw the Poison Pill" shall mean redeem
the outstanding Rights under the Rights Agreement between the Company and
Chemical Bank, as Rights Agent or take other action so that the existence of
such Rights does not interfere with the consummation of such Offer.
A Conforming Record Date shall mean a record date that is at least five business
days after the date on which the Company files its statement of position with
respect to such offer in accordance with Rule 14e-2 of the Securities Exchange
Act of 1934, as amended. An "Offer" shall mean either (a) a fully financed offer
to purchase all the Company's outstanding shares of Common Stock for cash by
means of a tender offer at a price that is least 25% greater than the average
closing price of such shares on the New York Stock Exchange during the five
trading days prior to the date on which such offer is first publicly disclosed
("Prior Market Price") or (b) any
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offer to acquire all the Company's outstanding shares of Common Stock by means
of a tender offer or exchange offer if the average closing price of such shares
on the New York Stock Exchange during the five trading days following the date
on which such offer is first publicly disclosed is at least 25% greater than the
Prior Market Price. If there is another Offer outstanding at the time such
offer is first publicly disclosed then the references to 25% in the preceding
sentence shall be changed to 10%."
The Poison Pill is one of the Company's principal anti-takeover devices.
The Poison Pill makes it economically infeasible to acquire control of the
Company in a transaction which is opposed by the board--- even if all, let alone
a majority, of the shareholders were to favor the acquisition. The Poison Pill
has this effect because it dilutes the ownership of stock by any purchaser who
acquires more than a threshold amount of the Company's stock without the board's
approval (see "OPERATION OF THE POISON PILL" below). Because of the Poison Pill
the board can thwart the wishes of the shareholders, who are the true owners of
the corporation, if the board opposes an offer favored by a majority of the
shareholders.
Wyser-Pratte approves of the limited use of the Poison Pill to delay
completion of an offer for a reasonable period of time so that stockholders have
an opportunity to get the highest possible price for their shares. He does not,
however, believe that the board should be able to block a premium offer for the
Company's shares indefinitely unless shareholders have voted in favor of such
action after receiving a full explanation of the board's reasons for blocking
the offer. Therefore, Wyser-Pratte is proposing that shareholders adopt an
amendment (the "Shareholder Rights By-law") to the Pennzoil by-laws. The
Shareholder Rights By-law would create a new policy at Pennzoil whereby a time
limit would be set on the board's use of the Poison Pill against certain premium
offers. Under the Shareholder Rights By-law, if an offer were made to acquire
all the Common Stock at a 25% premium over the market price, the board of
directors would be required to cease using the Poison Pill to block the offer
after ninety days unless the shareholders had voted in favor of continuing to
use the Poison Pill against such offer. The shareholder vote would give the
board an opportunity to persuade shareholders that the continued use of the
Poison Pill to block the offer was in the best interests of shareholders.
Wyser-Pratte believes that the Shareholder Rights Bylaw will give the
ultimate decision about whether shareholders can sell their shares into a
premium offer to those most directly affected by the decision - the owners of
the Company. Under the Shareholder Rights Bylaw a board of directors that wants
to continue using the Poison Pill to block a premium offer after ninety days
would be required to conduct a shareholder referendum on the board's blocking
policy. Although the board could block an unsolicited premium offer for ninety
days, and during that time period try to convince shareholders to reject the
offer, the shareholders would have the ultimate ability to exercise their
property rights and business judgment to decide for themselves whether they want
to sell their shares into the offer - and would be able to do so without being
hindered by the board's
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use of the Poison Pill. Wyser-Pratte believes that the arguments for allowing
stockholders to accept an offer for their shares, free from interference by the
board, are particularly strong when a premium offer has been outstanding for
ninety days or more. By then the board will have had an opportunity to persuade
shareholders that it is in their best interests to retain their shares. The
bidder will have been able to make the case for accepting its offer, and SEC
filings by both bidder and target will have provided full disclosure of the most
important issues relating to the offer.
The Shareholder Rights By-law would only apply to an offer to acquire
all of the Common Stock that met the following criteria: (i) it was a fully
financed cash offer at a price that was at least 25% greater than the average
closing price of such shares on the New York Stock Exchange during the five
trading days prior to the date on which such offer was first publicly disclosed
(such average closing price is hereinafter called the "Prior Market Price") or
(ii) the average closing price of such shares on the New York Stock Exchange
during the five trading days following the date on which such offer to acquire
all of the Common Stock was first publicly disclosed was at least 25% greater
than the Prior Market Price. If at the time such offer was first publicly
disclosed there was another Offer outstanding that met such criteria, then the
references to 25% in the preceding sentence shall be changed to 10% (such 25% or
10% premium, as the case may be, is hereafter referred to as the "Trigger
Premium"). Under the Shareholder Rights By-law, if the stockholders received
such an offer, the Board would be required to withdraw the Poison Pill unless
the Board was instructed not to withdraw the Poison Pill by a vote of
stockholders within ninety days after the offer was made. "Withdraw the Poison
Pill" means redeem the outstanding Rights under the Rights Agreement between the
Company and Chemical Bank, as Rights Agent or take other action so that the
existence of such Rights does not interfere with the consummation of such offer.
The Shareholder Rights By-law would not affect the ability of the Board
under Sections 251 and 271 of the Delaware General Corporation Law to approve or
disapprove of a proposed merger or sale of all or substantially all of the
assets of the Company. The By-law follows an approach to tender offer regulation
that is followed in Canada, the United Kingdom and other European Countries in
that it prevents the board from unilaterally electing to block a qualified offer
for an indefinite period of time, but allows the board to protect shareholder
interests by blocking offers that do not provide a control premium to all
shareholders or delaying the consummation of a bid while the board seeks a
better offer or tries to persuade stockholders to retain their shares. The idea
of allowing shareholders to control the use of the Poison Pill after a period of
time is not new. The Poison Pill described in Georgia Pacific Corporation v.
Great Northern Nekoosa Corporation, 727 F. Supp. 31 (D. Ct. Maine, 1989)
followed a similar approach. There the board was required, within 90 to 120 days
after receiving an offer, to hold a shareholder referendum on whether to accept
the offer and redeem the company's poison pill.
OPERATION OF POISON PILL. Pennzoil's Poison Pill operates in the
following fashion: Pursuant to the Poison Pill, each certificate for shares of
Common Stock also
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represents the same number of rights ("Rights") to purchase from the Company a
unit consisting of one one-hundredth of a share (a "Unit") of Series A Junior
Participating Preferred Stock, par value $1.00 per share (the "Preferred
Stock"), at a purchase price of $140 per Unit, subject to adjustment (the
"Purchase Price"). The Rights will separate from the Common Stock and a
"Distribution Date" will occur upon the earlier of (i) ten days following a
public announcement that a person or group of affiliated or associated persons
(an "Acquiring Person") has acquired, or obtained the right to acquire,
beneficial ownership of 15% or more of the outstanding shares of Common Stock
(the date of the announcement being the "Stock Acquisition Date"), or (ii) ten
business days (or such later date as may be determined by the Company's Board of
Directors before the Distribution Date occurs) following the commencement of a
tender offer or exchange offer that would result in a person's becoming an
Acquiring Person.
The Rights are not exercisable until the Distribution Date and will
expire at the close of business on October 28, 1999, unless earlier redeemed or
exchanged by the Company as described below.
As soon as practicable after the Distribution Date, certificates
representing the Rights will be mailed to holders of record of Common Stock as
of the close of business on the Distribution Date and, from and after the
Distribution Date, the separate Rights Certificates alone will represent the
Rights. All shares of Common Stock issued prior to the Distribution Date will be
issued with Rights. Shares of Common Stock issued after the Distribution Date in
connection with certain employee benefit plans or upon conversion of certain
securities will be issued with Rights. Except as otherwise determined by the
Board of Directors, no other shares of Common Stock issued after the
Distribution Date will be issued with Rights.
In the event (a "Flip-In Event") that a person becomes an Acquiring
Person (except pursuant to a tender or exchange offer for all outstanding shares
of Common Stock at a price and on terms that a majority of the independent
directors of the Company determines to be fair to and otherwise in the best
interests of the Company and its stockholders (a "Permitted Offer")), each
holder of a Right will thereafter have the right to receive, upon exercise of
such Right, a number of shares of Common Stock (or, in certain circumstances,
cash, property or other securities of the Company) having a Current Market Price
(as defined in the Rights Agreement) equal to two times the exercise price of
the Right. Notwithstanding the foregoing, following the occurrence of any
Flip-In Event, all Rights that are, or (under certain circumstances specified in
the Rights Agreement) were, beneficially owned by or transferred to any
Acquiring Person (or by certain related parties) will be null and void in the
circumstances set forth in the Rights Agreement. However, Rights are not
exercisable following the occurrence of any Flip-In Event until such time as the
Rights are no longer redeemable by the Company as set forth below.
In the event (a "Flip-Over Event") that, at any time from and after the
time an Acquiring Person becomes such, (i) the Company is acquired in a merger
or other business combination transaction (other than certain mergers that
follow a Permitted Offer), or (ii)
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50% or more of the Company's assets or earning power is sold or transferred,
each holder of a Right (except Rights that previously have been voided as set
forth above) shall thereafter have the right to receive, upon exercise, a number
of shares of common stock of the acquiring company having a Current Market Price
equal to two times the exercise price of the Right. Flip-In Events and Flip-Over
Events are collectively referred to as "Triggering Events." The Purchase Price
payable, and the number of Units of Preferred Stock or other securities or
property issuable, upon exercise of the Rights are subject to adjustment from
time to time to prevent dilution (i) in the event of a stock dividend on, or a
subdivision, combination or reclassification of, the Preferred Stock, (ii) if
holders of the Preferred Stock are granted certain rights or warrants to
subscribe for Preferred Stock or convertible securities at less than the current
market price of the Preferred Stock, or (iii) upon the distribution to holders
of the Preferred Stock of evidences of indebtedness or assets (excluding regular
quarterly cash dividends) or of subscription rights or warrants (other than
those referred to above).
At any time until ten days following the first date of public
announcement of the occurrence of a Flip-In Event, the Company may redeem the
Rights in whole, but not in part, at a price of $.01 per Right, payable, at the
option of the Company, in cash, shares of Common Stock or such other
consideration as the Board may determine. Immediately upon the effectiveness of
the action of the Board ordering redemption of the Rights, the Rights will
terminate and the only right of the holders of Rights will be to receive the
$.01 redemption price.
At any time after the occurrence of a Flip-In Event and prior to a
person's becoming the beneficial owner of 50% or more of the shares of Common
Stock then outstanding, the Company may exchange the Rights (other than Rights
owned by an Acquiring Person or an affiliate or an associate of an Acquiring
Person, which will have become void), in whole or in part, at an exchange ratio
of one share of Common Stock, and/or other equity securities deemed to have the
same value as one share of Common Stock, per Right, subject to adjustment.
Other than the redemption price, any of the provisions of the Rights
Agreement may be amended by the Board of Directors of the Company as long as the
Rights are redeemable. Thereafter, the provisions of the Rights Agreement may be
amended by the Board of Directors in order to cure any ambiguity, defect or
inconsistency, to make changes that do not materially adversely affect the
interests of holders of Rights (excluding the interests of any Acquiring
Person), or to shorten or lengthen any time period under the Rights Agreement;
provided, however, that no amendment to lengthen the time period governing
redemption shall be made at such time as the Rights are not redeemable.
THE FOREGOING IS A SUMMARY OF THE POISON PILL AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE THERETO. THE DESCRIPTION OF THE RIGHTS SET FORTH AS ITEM 1 OF THE
COMPANY'S REGISTRATION STATEMENT ON FORM 8-A, DATED OCTOBER 31, 1994, IS
ATTACHED HERETO AS EXHIBIT A.
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Under the Shareholder Rights By-law, the board can use the Poison Pill
to block an offer temporarily. However, if the Company received an Offer that
remained open for 90 days and no person became an Acquiring Person during such
period and the shareholders did not vote in that 90-day period to authorize the
board to continue to use the Poison Pill against the Offer, the Board would be
required to either redeem the Rights or amend the Poison Pill so that it would
no longer be an impediment to such an Offer. The Board would be required to take
such action even if the Board believed in the exercise of its fiduciary duties
that the Offer was not advantageous for the shareholders of Pennzoil.
Wyser-Pratte believes that this result is in the best interest of shareholders
because the shareholders, rather than the Board of Directors, should have the
ultimate decision on whether to accept the Offer.
IMPACT ON BOARD'S EXERCISE OF FIDUCIARY DUTIES. While if the Board
failed to obtain shareholder approval to continue using the Poison Pill against
a qualified Offer, the Shareholder Rights By-law could require the Board to
terminate such use whether or not the Offer was advantageous for the Company's
shareholders, Wyser-Pratte believes that the shareholders' failure to grant
such approval would be evidence that the Offer was advantageous for the
ompany's shareholders and that therefore the adoption of the Shareholder Rights
By-law is in the shareholders' best interests.
The Shareholder Rights By-law only applies to offers of at least the
Trigger Premium. The Trigger Premium is reduced from 25% to 10% if there is
another outstanding Offer, because in such circumstances the market price of the
stock is likely to reflect the expectation that the Company will be acquired at
a premium. Although the average acquisition premium in Pennzoil's industry has
been higher than the Trigger Premium, Wyser-Pratte believes that a premium of
this size is large enough to be worthy of consideration by stockholders. While
there can be no assurance that the Company will ultimately get a price higher
than the Trigger Premium, acquisition bids often attract competition that leads
to subsequent offers at a price higher than the initial offer or the initial
bidder may raise its price.
Wyser-Pratte believes that the provision for a shareholder vote assures
that the By-law will not be used to facilitate coercive offers. The courts have
defined a coercive offer as "an offer which has the effect of compelling
shareholders to tender their shares out of fear of being treated less favorably
in the second stage." Moore Corp. v. Wallace Computer Servs., 907 F. Supp. 1545,
1557 n.13 (D. Del. 1995) (interpreting Delaware law). If a majority of the
Company's shareholders consider an offer coercive, the Board will be able to win
shareholder approval to continue using the Poison Pill against the Offer for
more than ninety days.
Based on his experience as an investor in target company securities,
Wyser-Pratte believes that ninety days is normally sufficient time for a target
company, seeking a higher offer, to complete the bidding process For example,
the Great Northern Nekoosa poison pill discussed above provided for a
shareholder referendum, 90 to 120 days after an offer was received, on whether
the offer should be accepted and the pill redeemed. However, circumstances could
arise in which a board of directors seeking a higher offer was unable
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to complete the entire process of finding and closing an alternative transaction
within the ninety-day period prescribed by the Shareholder Rights By-law.
Similarly, if a board were trying to negotiate the terms of an acquisition with
a prospective purchaser, the inability to resist a hostile tender offer by that
purchaser beyond an initial ninety-day period could reduce the board's leverage
to negotiate favorable terms for stockholders. Wyser-Pratte believes the
ninety-day limit in the Shareholder Rights By-law need not prevent the Board
from obtaining the best possible terms for stockholders in either of these
situations, because the Board would be free to seek stockholder approval to
continue using the Poison Pill against an Offer for an additional period of
time. However, given the time periods required to solicit proxies and possibly
to call and hold a stockholders meeting, the Board would have to plan ahead to
get such approval before the end of the ninety-day period; and if the Board
failed to do so it is possible that under the Shareholder Rights By-law the
Board would lose the power to use the Poison Pill against an Offer that was not
in the best interests of Shareholders.
LEGAL VALIDITY. Wyser-Pratte believes that the Shareholder Rights By-law
is valid because Delaware law authorizes shareholders to adopt bylaws that
relate to the powers of the shareholders and the board of directors. However, he
recognizes that the Delaware courts have not considered the validity of the
Shareholder Rights Bylaw or any similar by-law and, therefore, have not resolved
the extent to which stockholder-adopted by-laws may limit the authority of a
board of directors to oppose, or to adopt or employ defensive measures against,
takeover bids favored by a majority of the shareholders. Accordingly, it is
uncertain whether the Shareholder Rights By-law would survive a court challenge.
However, there is support for the validity of the Shareholder Rights
By-law in a recent Oklahoma Federal Court decision involving provisions of the
Oklahoma Corporation Law that are substantially the same as the Delaware
provisions applicable to the Company. International Brotherhood of Teamsters
General Fund v. Fleming Companies, Inc., No. Civ-96-1650-A (1997). The Fleming
court required a corporation to include in its proxy statement for its 1997
annual shareholders meeting a proposal to adopt a by-law requiring the board of
directors to redeem the existing poison pill and to submit any successor poison
pill to a shareholder vote. In reaching this decision the court found that
the shareholders had the power to nullify or amend a poison pill adopted by the
board. The court's decision has been appealed to the Tenth Circuit Court of
Appeals, which has requested a ruling on the validity of the bylaw under
Oklahoma law from the Oklahoma Supreme Court.
Wyser-Pratte believes that Section 109 of the Delaware General
Corporation Law authorizes the enactment of the Shareholder Rights By-law.
Section 109(a) gives stockholders the power to "adopt, amend or repeal By-laws."
Section 109(b) states: "The by-laws may contain any provision, not inconsistent
with law or with the certificate of incorporation, relating to the business of
the corporation, the conduct of its affairs, and its rights or powers or the
rights or powers of its stockholders, directors, officers or employees."
(emphasis added). The Shareholder Rights By-law relates to "the rights or powers
of...stockholders, [or] directors" because after 90 days from the time a
qualified
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offer is received, the By-law takes away the board's unilateral power to use the
Poison Pill against the offer and allows either the board or the shareholders to
end such use.
Section 109 does invalidate by-laws that are "inconsistent with law or
with the certificate of incorporation..." In a review of the Delaware General
Corporation Law, the Certificate of Incorporation and By-laws, Wyser-Pratte
has not discovered any provisions that bar stockholders from adopting the
Shareholder Rights By-law. He believes that Section 141(a) of the Delaware
General Corporation Law does not bar the adoption of the Shareholder Rights
By-law. That section states: "The business and affairs of every corporation
organized under this chapter shall be managed by or under the direction
of a board of directors, except as may be otherwise provided in this
chapter or in its certificate of incorporation." (emphasis added)
Wyser-Pratte believes that the adoption of the Shareholder Rights By-law is not
inconsistent with Section 141(a) for several reasons. First, Wyser-Pratte
believes that the enactment of the Shareholder Rights By-law does not involve
management of the "business and affairs of the corporation" within the meaning
of Section 141(a), but rather the creation of a framework or parameters within
which such management takes place. Second, to the extent that Section 141(a) is
read as granting the board of directors authority over the business and affairs
of the corporation, that grant is qualified by the phrase "except as may be
otherwise provided in this chapter or in its certificate of incorporation."
Therefore, any such grant of authority is not exclusive, but rather leaves room
for the grant of authority in Section 109 for stockholders to adopt by-laws,
such as the Shareholder Rights By-law, which relate to the rights and powers of
stockholders and directors. Finally, Wyser-Pratte believes that any reading of
Section 141(a) that invalidated the Shareholder Rights By-law would make
meaningless Section 109's broad grant of authority for stockholders to adopt
by-laws relating to the rights and powers of stockholders and directors.
While no case other than Fleming has considered bylaws similar to the
Shareholder Rights Bylaw, there are cases that have upheld bylaws allocating
corporate governance powers to the shareholders, against claims that these
bylaws illegally invade the board's power to mange the business and affairs of
the corporation. Such cases include Securities and Exchange Commission v.
Transamerica Corp., 163 F. 2d 511 (3rd Cir. 1947), cert. Denied, 332 U.S. 847
(1948) (involving a bylaw allowing the shareholders of a Delaware corporation to
select the company's independent auditors) and Ripley v. Storer, N.Y. Sup. Ct.,
139 N.Y.S. 2d 786, aff'd N.Y. App. Div., 142 N.Y.S. 2d 269 (1955) (involving a
New York corporation which adopted a bylaw requiring shareholder approval of
contracts entered into by the board of directors).
The Delaware Supreme Court has strongly endorsed the power of
shareholders to adopt corporate bylaws. The Delaware Supreme Court has stated:
"The power [of stockholders] to make and amend the bylaws of a corporation has
been recognized as an inherent feature of the corporate structure. The bylaws of
a corporation are presumed to be valid, and the courts will construe the bylaws
in a manner consistent with the law rather than strike down the bylaws." Frantz
Manufacturing Co. v. EAC Industries, Del. Supr., 501 A.2d 401, 407 (1985)
(citations ommitted). Other courts have recognized that shareholders, as the
owners of a corporation, have the ultimate power over corporate
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governance. An example is the opinion of the United States Supreme Court in
Rogers v. Hill, 289 U.S. 582, 589 (1933), which quoted the statement in a New
Jersey state court opinion that "It would be preposterous to leave the real
owners of the corporate property at the mercy of their agents, and the law has
not done so."
Wyser-Pratte also believes that there is no inconsistency between the
Shareholder Rights By-law and Section 157 of the Delaware General Corporation
Law. While Section 157 states that rights or options to purchase a company's
stock shall be subject to agreements approved by the board of directors, Section
157 does not require that the board of directors shall control the exercise of
the company's rights under such agreements, and Wyser-Pratte believes that any
agreement that purports to give the board exclusive control of such rights is an
illegal delegation of the shareholders' corporate governance powers. The opinion
in the Fleming case, cited above, rejected the company's argument that an
Oklahoma provision identical to Section 157 prevented shareholders from
requiring redemption of the company's Poison Pill. Section 157 differs from the
Georgia statutory provision that was at issue in Invacare Corp. v. Healthdyne
Technologies, Inc., 968 F.Supp. 1578 (N.D. Ga. 1997). There a federal district
court, interpreting the Georgia statute dealing with rights or options to
purchase a company's stock, held that the statute barred shareholders from
requiring the redemption of the Poison Pill. However, the Georgia statute,
unlike Delaware Section 157, states that the board shall have "sole discretion"
over the terms of rights to acquire the company's stock, language which, the
Invacare court determined, was enacted to give the board of a Georgia
corporation sole discretionary control over the terms and conditions of a Poison
Pill. Section 157 has no such language or statutory history and therefore,
Wyser-Pratte believes, the Invacare case does not apply to the Shareholder
Rights By-law.
Wyser-Pratte also believes that the Shareholder Rights By-law does not
conflict with Delaware case law dealing with the fiduciary duties of boards of
directors. In certain cases, courts interpreting Delaware law have, on the basis
of particular facts presented, upheld reasonable defensive measures adopted by
directors who, in good faith and upon reasonable investigation, believed that a
hostile offer posed a danger to corporate policy and effectiveness, even though
a majority of the stockholders may have tendered their shares. Wyser-Pratte
believes, however, that those cases do not support invalidating the Shareholder
Rights By-law because those cases only dealt with whether the board had properly
exercised its powers, and not with whether those powers can be circumscribed by
the shareholders pursuant to Section 109. In none of those cases was the board's
discretion limited by a by-law previously adopted by stockholders pursuant to
the grant of authority in Section 109. Wyser-Pratte believes it is inherent in
the Delaware scheme of corporate law that while the board is entitled to
exercise its judgment in responding to a tender offer or other takeover bid, the
board must exercise its judgment within the framework of statutes (including
Section 109), charter provisions and by-laws, such as the Shareholder Rights
By-law, which in certain instances limit the actions that directors may take
even when the directors believe that their chosen course of action is in the
best interests of stockholders. Wyser-Pratte further believes that the
Shareholder Rights By-law is supported by Delaware case law recognizing that at
some point in time the failure to redeem a poison pill can constitute a
fiduciary breach, and by Delaware case law recognizing that directors' exercise
of their fiduciary duties is limited by the voting rights of shareholders.
IN ORDER TO GIVE SHAREHOLDERS A GREATER VOICE IN THE GOVERNANCE OF THE COMPANY,
WYSER-PRATTE RECOMMENDS THAT YOU VOTE FOR THE PROPOSAL TO AMEND THE BY-LAWS
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TO SET A TIME LIMIT ON THE USE OF THE COMPANY'S POISON PILL AGAINST CERTAIN
OFFERS UNLESS SUCH CONTINUED USE IS APPROVED BY SHAREHOLDERS.
PROPOSAL TO ADOPT A "SHAREHOLDER INTERESTS PROTECTION BYLAW" THAT WOULD
REQUIRE A UNANIMOUS VOTE OF THE DIRECTORS TO APPROVE "DEFENSIVE ACTIONS" BY THE
BOARD UNLESS SUCH ACTIONS HAVE BEEN APPROVED BY A SHAREHOLDER VOTE
(ITEM 2 ON PROXY CARD)
SHAREHOLDERS ARE ASKED TO CONSIDER AND VOTE UPON THE PROPOSAL TO ADOPT
A "SHAREHOLDER INTERESTS PROTECTION BYLAW" THAT WOULD REQUIRE A UNANIMOUS VOTE
OF THE DIRECTORS TO APPROVE "DEFENSIVE ACTIONS" BY THE BOARD UNLESS SUCH ACTIONS
HAVE BEEN APPROVED BY SHAREHOLDERS:
"RESOLVED, that the Shareholders hereby amend the Company's By-laws by
adding a new Article X, which shall read as follows:
"Notwithstanding any provision to the contrary contained in these
By-laws, the unanimous vote of all the directors then in office shall be
required to approve any Defensive Action by the board of directors, unless such
Defensive Action is approved by a vote of a majority of the votes which all
shareholders are entitled to cast (i.e., by the vote of a majority of the
outstanding shares entitled to vote). `Defensive Action' shall mean (1) any
action by the board with the purpose or effect, in whole or in part, of impeding
a change in control of the Company or increasing the board's power to impede
such a change in control in the future, including without limitation the
extension of the expiration date of the Company's Shareholder Rights Plan past
October 28, 1999 or the addition of a "Dead Hand" provision to such Plan, or (2)
the expenditure of any corporate funds on a proxy contest against a shareholder
of the Company (including litigation in connection with such proxy contest),
unless the Company agrees to reimburse all such costs incurred by such
shareholder if 10% of the Company's shares are voted in favor of any of such
shareholder's proposals. A "Dead Hand" provision shall mean any provision of the
Rights agreement between the Company and Chemical Bank, as Rights Agent, or any
related document (the "Poison Pill") that limits in any way the voting power of
directors elected after a certain date or event on matters relating to the
Poison Pill, compared to either the voting power of directors elected prior to
such date or event or the voting power of directors elected on the
recommendation of directors elected prior to a specified date or event."
The Poison Pill is not the only device by which the board can interfere
with a takeover bid opposed by the board of directors. For example, the board
can dilute the bidder's voting power by issuing voting shares to a person
opposed to the takeover bid. Wyser-Pratte believes it is important to limit the
use of these other anti-takeover devices. Some techniques that do not work
against the Poison Pill can be effective against these other anti-takeover
devices, because these other devices require board action to be
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implemented, whereas the Poison Pill is activated automatically (although
Wyser-Pratte believes that in substance the board is taking action when it
allows the Poison Pill to block an offer).
Therefore, Wyser-Pratte is proposing the adoption of a bylaw (the
"Shareholder Interests Protection Bylaw") that would require a unanimous board
vote to approve any Defensive Action by the board, unless such action was
approved by a shareholder vote. If this bylaw is adopted and Wyser-Pratte is
elected to the board, Wyser-Pratte's vote would be required to approve any
Defensive Action by the board.
The proposed bylaw broadly defines "Defensive Action" to include any action
with the purpose or effect, in whole or in part, of impeding a change in control
of the Company or increasing the board's power to impede such a change in
control in the future. Wyser-Pratte believes it is desirable to include such a
broad definition of Defensive Action in the bylaw, so that the bylaw covers any
new devices that are created to block takeover bids in the future. He also
believes that such a broad definition can be applied by the courts, since the
Delaware courts already apply a similar test in determining whether a board is
engaged in anti-takeover defenses that give rise to "enhanced" duties under
Unocal Corporation v. Mesa Petroleum Co. While there are no Delaware cases
considering the validity of a Shareholder Interests Protection Bylaw,
Wyser-Pratte believes the Frantz case, discussed above, supports the validity
of the bylaw. In Frantz, the Delaware Supreme Court ruled that a majority
shareholder may adopt a bylaw requiring a unanimous vote for action by the board
in order "to limit the Frantz board's anti-takeover maneuvering after EAC had
gained control of the corporation."
The Shareholder Interests Protection Bylaw may not prevent the use of
the Poison Pill against an acquisition proposal opposed by the board, because
the Poison Pill operates automatically unless the board redeems the Pill or
prevents the Pill from applying to the offer. The bylaw will, however, require a
unanimous board vote (or shareholder approval) to extend the Pill past its
present October 28, 1999 expiration date or to amend the Pill to include a Dead
Hand clause. A "Dead Hand" clause typically prevents a newly elected board from
voting to redeem the Pill by only allowing such action to be taken by
"Continuing Directors" (i.e., directors who were in office before a change in
control, or their designees). Wyser-Pratte believes that it would be a breach of
the directors' fiduciary duties to add a Dead Hand clause to the Company's
Poison Pill, but he has included a specific reference to the Dead Hand Clause in
the Shareholder Interests Protection Bylaw, to reduce the risk that the board
would adopt such a provision and that it would be upheld. In addition to the
changes to the Poison Pill which are specifically mentioned in the Shareholder
Interests Protection Bylaw, the Bylaw's general language would cover other
actions with respect to the Pill that prevented a change in control or increased
the board's power to do so.
The definition of Defensive Actions also includes the expenditure of
Company funds on a proxy contest against a shareholder (including expenditures
on litigation) unless the board agrees to reimburse the shareholder's expenses
if at least 10% of the Company's
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shares are voted in favor of any of the shareholder's proposals. Wyser-Pratte
included this provision in the definition of Defensive Action to help create a
level playing field in future proxy contests. Today management is able to
utilize Company funds in a proxy contest with shareholders, while the
shareholders (who may be seeking to vindicate the interests of all shareholders)
must fund their own expenses. Typically, the shareholder's expenses do not get
reimbursed by a company unless a court orders these expenses to be reimbursed or
there is a change in control of the company and the new board votes to reimburse
the expenses.
PROPOSAL TO AMEND THE BYLAWS TO ALLOW THE HOLDERS OF 10% OF THE SHARES TO CALL A
SPECIAL MEETING OF SHAREHOLDERS AND TO INCREASE THE ABILITY OF SHAREHOLDERS TO
MAKE PROPOSALS AND TO NOMINATE DIRECTORS AT SHAREHOLDER MEETINGS
(ITEM 3 ON PROXY CARD)
SHAREHOLDERS ARE ASKED TO CONSIDER AND VOTE UPON THE PROPOSAL TO AMEND THE
BY-LAWS TO ENABLE THE HOLDERS OF 10% OF THE COMPANY'S SHARES TO CALL A SPECIAL
MEETING OF SHAREHOLDERS AND TO INCREASE THE ABILITY OF SHAREHOLDERS TO MAKE
PROPOSALS AND NOMINATE DIRECTORS AT SHAREHOLDER MEETINGS:
"RESOLVED, that in accordance with Article VIII of the By-laws of the
Company, the Shareholders of the Company hereby amend Article I, Section 2 of
the By-laws so that it reads in its entirety as follows:
"Special meetings of the shareholders may be called at any time by the
Board of Directors, the Chairman of the Board, the Executive Committee, the
Chairman of the Executive Committee or the President. Upon written request of
any person or persons who have duly called a special meeting, it shall be the
duty of the Secretary of the Corporation to fix the date of the meeting to be
held not less than ten nor more than sixty days after the receipt of the request
and to give due notice thereof. If the Secretary shall neglect or refuse to fix
the date of the meeting and give notice thereof, the person or persons calling
the meeting may do so.
Notwithstanding anything to the contrary contained in these By-laws, a
special meeting of the shareholders may also be called at any time by
shareholders entitled to cast 10% of the votes which all shareholders are
entitled to cast (i.e., by 10% of the shares entitled to vote). The shareholders
calling such a meeting may also fix the date, time and place of the meeting,
which may be held within or without the State of Delaware. If such shareholders
have fixed any such items, such shareholders shall have all the power to change
the date, time and/or place of such meeting or to adjourn such meeting that the
board of directors or any officer of the Corporation would have in respect of a
special meeting called by the board of directors; and agent designations
executed by shareholders in connection with calling such meeting may delegate
such
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power to the agents designated to call such meeting. Such shareholders shall
call such special meeting and, if they have elected to do so, shall fix the
date, time and place of the meeting by means of a written notice to the
Secretary of the Company." (Additions to the Bylaw have been italicized.)
"RESOLVED, that the Shareholders of the Company hereby amend Article I,
Sections 9 and 10 of the By-laws so that they read in their entirety as follows:
SECTION 9. Subject to such rights of the holders of Preferred Stock or
Preference Common Stock or any series thereof as shall be prescribed in the
Certificate of Incorporation or in the resolutions of the Board of Directors
providing for the issuance of any such series, only persons who are nominated in
accordance with the procedures set forth in this Section 9 shall be eligible for
election as, and to serve as, directors. Nominations of persons for election to
the Board of Directors may be made at a meeting of shareholders at which
directors are to be elected (a) by or at the direction of the Board of Directors
(or any duly authorized committee thereof) or (b) by any shareholder of the
Corporation (i) who is a shareholder of record on the date of the giving of the
notice provided for in this Section 9 and on the record date for the
determination of shareholders entitled to vote at such annual meeting and (ii)
who complies with the requirements of this Section 9. In addition to any other
applicable requirements, nominations, other than those made by or at the
direction of the Board of Directors (or any duly authorized committee thereof)
shall be preceded by timely notice thereof in proper written form to the
Secretary of the Corporation.
To be timely, a shareholder's notice must be delivered to, or mailed and
received at, the principal executive offices of the Corporation not less than 60
days nor more than 120 days prior to the anniversary date of the immediately
preceding annual meeting of shareholders; provided, however, that in the event
that the annual meeting is called for a date that is not within 30 days before
or after such anniversary date, notice by the shareholder, in order to be
timely, must be so received not later than the close of business on the 30th
day following the day on which such notice of the date of the annual meeting was
mailed or public disclosure of the date of the annual meeting was made,
whichever first occurs. In no event shall the public disclosure of an
adjournment of an annual meeting commence a new time period for the giving of a
shareholder's notice as described above.
To be in proper written form, a shareholder's notice to the Secretary
must set forth (a) as to each person whom the shareholder proposes to nominate
for election as a director (i) the name, age, business address and residence
address of such person, (ii) the principal occupation or employment of such
person, (iii) the class or series and number of shares of capital stock of the
Corporation which are owned beneficially or of record by such person and (iv)
any other information relating to such person that would be required to be
disclosed in a proxy statement or other filings required to be made in
connection with solicitations of proxies for election of directors pursuant to
Section 14 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and the rules and
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regulations promulgated thereunder; and (b) as to the shareholder giving the
notice (i) the name and record address of such shareholder, (ii) the class or
series and number of shares of capital stock of the Corporation which are owned
beneficially or of record by such shareholder, (iii) a description of all
arrangements or understandings between such shareholder and each proposed
nominee and any other person or persons (including their names) pursuant to
which the nomination(s) are to be made by such shareholder, (iv) a
representation that such shareholder intends to appear in person or by proxy at
the meeting to nominate the persons named in its notice and (v) any other
information relating to such shareholder that would be required to be disclosed
in a proxy statement or other filings required to be made in connection with
solicitations of proxies for election of directors pursuant to Section 14 of the
Exchange Act and the rules and regulations promulgated thereunder. Such notice
must be accompanied by a written consent of each proposed nominee to be named as
a nominee and to serve as a director if elected.
No person shall be eligible for election as a director of the
Corporation unless nominated in accordance with the procedures set forth in this
Section 9. If the Chairman of the meeting determines that a nomination was not
made in accordance with the foregoing procedures, the Chairman shall declare to
the meeting that the nomination was defective and such defective nomination
shall be disregarded, subject to the power of a majority of the shares present
at such meeting in person or by proxy to overrule the Chairman's ruling.
Notwithstanding anything in the second paragraph of this Section 9 to
the contrary, in the event that the number of directors to be elected to the
Board of Directors of the Corporation is increased and there is no public
disclosure by the Corporation naming all of the nominees for director or
specifying the size of the increased Board of Directors at least 90 days prior
to the first anniversary of the preceding year's annual meeting, a shareholder's
notice required by the by-law shall also be considered timely, but only with
respect to nominees for any new positions created by such increase, if it shall
be delivered to the Secretary at the principal offices of the Corporation not
later than the close of business on the 30th day following the day on which such
public disclosure is first made by the Corporation.
For purposes of this Section 9 and Section 10 of these by-laws, "public
disclosure" shall mean disclosure in a press release reported by the Dow Jones
News Service, Associated Press, PR Newswire, Bloomberg or comparable national
news service or in a document publicly filed by the Corporation with the
Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the
Exchange Act.
Notwithstanding anything to the contrary contained in these
By-laws, if any shareholder has properly given notice, pursuant to this Section
9, of his intention to nominate a director pursuant to this Article, such
shareholder may substitute another nominee at any time up to and including the
time of the meeting if the candidacy of the former nominee is withdrawn for any
reason. (Additions to the Bylaws have been italicized.)
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SECTION 10. No business may be transacted at an annual meeting of
shareholders, other than business that is either (a) specified in the notice of
meeting (or any supplement thereto) given by or at the direction of the Board of
Directors (or any duly authorized committee thereof), (b) otherwise properly
brought before the annual meeting by or at the direction of the Board of
Directors (or any duly authorized committee thereof) or (c) otherwise properly
brought before the annual meeting by any shareholder of the Corporation (i) who
is a shareholder of record on the date of the giving of the notice provided for
in this Section 10 and on the record date for the determination of shareholders
entitled to vote at such annual meeting and (ii) who complies with the notice
procedures set forth in this Section 10. In addition to any other applicable
requirements, for business to be properly brought before an annual meeting by a
shareholder, such shareholder must have given timely notice thereof in proper
written form to the Secretary of the Corporation.
To be timely, a shareholder's notice must be delivered to or mailed and
received at the principal executive offices of the Corporation not less than 60
days nor more than 120 days prior to the anniversary date of the immediately
preceding annual meeting of shareholders; provided, however, that in the event
that the annual meeting is called for a date that is not within 30 days before
or after such anniversary date, notice by the shareholder, in order to be
timely, must be so received not later than the close of business on the 30th
day following the day on which such notice of the date of the annual meeting was
mailed or public disclosure (as defined in Section 9) of the date of the annual
meeting was made, whichever first occurs. In no event shall the public
disclosure of an adjournment of an annual meeting commence a new time period for
the giving of a shareholder's notice as described above.
To be in proper written form, a shareholder's notice to the Secretary
must set forth as to each matter such shareholder proposed to bring before the
annual meeting (i) a brief description of the business desired to be brought
before the annual meeting and the reasons for conducting such business at the
annual meeting, (ii) the name and record address of such shareholder, (iii) the
class or series and number of shares of capital stock of the Corporation which
are owned beneficially or of record by such shareholder, (iv) a description of
all arrangements or understandings between such shareholder and any other person
or persons (including their names) in connection with the proposal of such
business by such shareholder and any material interest of such shareholder in
such business and (v) a representation that such shareholder intends to appear
in person or by proxy at the annual meeting to bring such business before the
meeting.
No business shall be conducted at the annual meeting of shareholders
except business brought before the annual meeting in accordance with the
procedures set forth in this Section 10; provided, however, that, once business
has been properly brought before the annual meeting in accordance with such
procedures, nothing in this Section 10 shall be deemed to preclude discussion by
any shareholder of any such business. If the Chairman of an annual meeting
determines that business was not properly brought before the annual
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meeting in accordance with the foregoing procedures, the Chairman shall declare
to the meeting that the business was not properly brought before the meeting and
such business shall not be transacted, subject to the power of a majority of the
shares present at such meeting in person or by proxy to overrule the Chairman's
ruling.
At a special meeting of shareholders, only such business shall be
conducted as shall have been set forth in the notice relating to the meeting. At
any meeting, matters incident to the conduct of this meeting may be voted upon
or otherwise disposed of as the presiding officer of the meeting (or the holders
of a majority of the shares present at such meeting in person or by proxy) shall
determine to be appropriate.
Notwithstanding anything to the contrary contained in these By-laws, if
a shareholder has properly given notice, pursuant to this Section 10, of
business to be brought before an annual shareholders meeting in accordance with
this Article, such shareholder may alter, amend, add to or revoke any such
notice or give notice of any additional business to be transacted at such
meeting at any time up to ten days prior to the date of such meeting."
(Additions to the Bylaws have been italicized.)
The ability of the board to finance a proxy contest with Company
funds is not the only respect in which Wyser-Pratte believes there is a lack of
a level playing field in proxy contests between the board and shareholders.
Under the existing bylaws, only the board and management can call a special
meeting of shareholders. At an annual meeting, shareholders must comply with a
strict timetable for making proposals and nominations, and have no explicit
right to change these items, while the board is free to add items and names to
the agenda, subject to compliance with the proxy rules and fiduciary duties. If
the board makes such changes after the shareholder notification period has
ended, shareholders may not be able to respond by changing their proposals or
making new proposals. In interpreting other advance notification bylaws
involving nominations to the board, the Delaware courts have ruled that when
there is a material change in circumstances after the period for shareholder
nominations ends, corporations may be required to make an exception to such
advance notification requirements to give shareholders a fair opportunity to
nominate directors. Hubbard v. Hollywood Park, 1991 Del. Ch. LEXIS 9 (Jan. 14,
1991). However, there is no certainty about whether such a judicially imposed
limitation on advance notification bylaws would apply in any particular
circumstance. Wyser-Pratte is proposing to amend the bylaws dealing with the
call of a special meeting and shareholder proposals and nominations to eliminate
or reduce some of the board's tactical advantages in a proxy contest with
shareholders as a result of these provisions.
One of Wyser-Pratte's principal purposes for proposing a bylaw that would
give shareholders the right to call a special meeting is to enable shareholders
to remove the board of directors if the board violates its fiduciary duties
or rejects an acquisition proposal that is in the best interests of the
corporation.
As a general matter, Wyser-Pratte believes that the holders of a
majority of the shares should be able to remove the board at any time, with or
without cause, and that the
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terms of all the directors should expire at each annual meeting. This is not the
system that prevails at the Company, however, because the Company's certificate
of incorporation provides for a classified or "staggered" board of directors. As
a result, under Delaware law and the Company's certificate of incorporation,
shareholders may only remove the directors for cause by a vote of a majority of
the outstanding shares. The certificate also purports to give the remaining
directors, if any, the power to fill any vacancies arising from the removal of
directors although, as discussed below, Delaware law gives shareholders the
right to fill vacancies in some circumstances. The staggered board also results
in only [four] of the [twelve] directors coming up for reelection in any year.
Wyser-Pratte believes that the staggered board can be as powerful a
weapon as the Poison Pill against an acquisition proposal that is favored by
shareholders and opposed by the board. In the absence of a staggered board, the
holders of a majority of the shares would be free to remove a board that was
interfering with an acquisition proposal that they favored, and a bidder that
acquired a majority of the Company's shares would be able to take control of the
board either immediately or at the next annual meeting Under a staggered board
regime, neither of these actions is possible unless the directors can be removed
for cause. If a bidder acquires more than 90% of each class of stock, the
bidder can acquire the balance of the shares through a short-form merger without
board action. However, a bidder who purchases a majority of the Company's
shares, but fails to acquire 90% of each class, may have to live with a hostile
board of directors for several years, without the ability to acquire the
remainder of the Company's shares. Since the staggered board is imposed by the
certificate of incorporation, which cannot be amended without board approval,
the holders of a majority of the voting shares lack the power to repeal the
staggered board.
Wyser-Pratte believes that these aspects of the staggered board, along
with the Company's Poison Pill and its subjection to Section 203 of the Delaware
General Corporation Law (discussed below), discourage prospective bidders from
making acquisition proposals that would be in the best interests of
shareholders.
While Wyser-Pratte believes that the staggered board will always be an
impediment to maximizing shareholder value, he believes that its effects can be
ameliorated in appropriate circumstances by exercising the shareholders' right
to remove directors for cause.
There is no definitive Delaware authority on what constitutes cause for
removal, or what is sufficient proof to sustain a shareholder vote to remove
directors. However, authority from other jurisdictions suggests that
shareholders may be able to remove directors for cause in circumstances where a
class or derivative action against the directors would not be successful.
Procedurally, a shareholder seeking to remove a director for cause must
make specific charges against the director and give the director adequate notice
of such charges and an opportunity to present the director's case to the
stockholders before they vote. The leading
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Delaware authority on the removal of directors for cause, Campbell v. Loew's,
Inc., 134 A. 2d 852, 859 (Del. Ch. 1957), indicates that "if the charges are
legally sufficient on their face" shareholders would be entitled to proceed with
a proposal to remove the directors, with any judicial review occurring after the
shareholders meeting. The Campbell court also stated that "[m]atters for
stockholder consideration need not be conducted with the same formality as
judicial proceedings." Id. at 860.
Wyser-Pratte believes that it may be possible to remove directors for
conduct that does not fall to the level of a violation of their fiduciary
duties. The standard of cause for removal mentioned most frequently in the cases
in Delaware and other jurisdictions is conduct that is harmful or burdensome to
the corporation. The cases do not state that such conduct must also be a breach
of the directors' fiduciary duties, although some Delaware commentators have
concluded that this requirement exists.
Wyser-Pratte believes that if the removal proceeding arose out of the
board's response to a takeover bid, the courts would consider the effect of the
directors' action on the shareholders, since the board is obligated to act in
the best interests of the corporation and its shareholders in responding to a
takeover bid.
Cases from other jurisdictions indicate that the shareholders are
entitled to weigh the evidence presented in a removal proceeding, and that if
the shareholders decide to remove the directors, a court will overturn that
decision only if there was no evidence to support the shareholders' action. By
contrast, a shareholder bringing a derivative or class action against the
directors in connection with the board's response to a takeover bid has the
burden of establishing that the directors violated their fiduciary duties.
Wyser-Pratte believes that if the board rejects an acquisition that is
in the best interests of shareholders, removal of the board may be the
shareholders' most appropriate remedy. However, under the existing by-laws the
shareholders could only take this action at an annual meeting, and even then
only if the action were proposed 90 to 120 days in advance of the meeting.
Wyser-Pratte believes that this timetable may make removal for cause an
ineffective remedy, since a prospective purchaser may have abandoned its effort
to acquire the Company (as UPR did) by the time of the annual meeting.
Therefore, Wyser-Pratte believes shareholders should be able to call a special
meeting to consider removal of the board promptly after the board rejects an
offer that is in the shareholders' best interests.
The Company's certificate of incorporation gives the board the power to
fill vacancies arising from the removal of directors. However, under Section
223(c) of the Delaware General Corporation Law, the court may order a
shareholder vote to fill vacancies if shareholders remove a majority of the
directors.
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PROPOSAL TO AMEND THE BY-LAWS TO PREVENT THE BOARD FROM CHANGING ANY OF
THE BYLAWS ADOPTED BY THE SHAREHOLDERS AT THIS ANNUAL MEETING
(ITEM 4 ON PROXY CARD)
SHAREHOLDERS ARE ASKED TO CONSIDER AND VOTE UPON THE PROPOSAL TO AMEND
THE BY-LAWS TO PREVENT THE BOARD FROM CHANGING ANY OF THE BY-LAWS ADOPTED BY THE
SHAREHOLDERS AT THIS ANNUAL MEETING:
"RESOLVED, that in accordance with Article VIII of the By-laws of the
Company, the shareholders of the Company hereby amend the By-laws by deleting
Article VIII of the By-laws in its entirety and replacing therewith the
following:
`These By-laws may be altered, amended, added to or repealed by the
shareholders at any annual or special meeting, by the vote of shareholders
entitled to cast at least a majority of the votes which all shareholders are
entitled to cast (i.e., by the vote of a majority of the outstanding shares
entitled to vote), and, except as may be otherwise required by law, the power to
alter, amend, add to or repeal these By-laws is also vested in the Board of
Directors (subject always to the power of the shareholders to change such
action); provided, however, that notice of the general nature of any such action
proposed to be taken at a board of directors' meeting shall be included in the
notice of the meeting of the Board of Directors at which such action is taken;
and provided further that the Board of Directors shall have no power to alter,
amend, add to or repeal Section 2, 9 or 10 of Article I, this Article VIII or
Articles IX or X of these By-laws."
The purpose of this proposal is to prevent the board of directors from
repealing or otherwise changing any bylaws adopted by the shareholders at this
Annual Meeting. Article Fifth of the Certificate of Incorporation authorizes the
board of directors "Except as may be otherwise provided in the By-laws, to
make, alter, amend and repeal the By-laws of the corporation, subject always to
the power of the stockholders to change such action." (emphasis added) This
proposal would add a provision to the By-laws denying the board of directors the
power to amend the bylaws to be adopted by shareholders at the annual meeting.
PROPOSAL TO AMEND THE BYLAWS TO ELECT NOT TO BE GOVERNED BY THE BUSINESS
COMBINATION STATUTE
(ITEM 5 ON PROXY CARD)
SHAREHOLDERS ARE ASKED TO CONSIDER AND VOTE UPON THE PROPOSAL TO AMEND
THE BY-LAWS TO ELECT NOT TO BE GOVERNED BY THE BUSINESS COMBINATION STATUTE:
"RESOLVED, that pursuant to Section 203(b)(3) of the Delaware General
Corporation Law, the Shareholders hereby amend the Company's By-laws by adding a
new section [___] which shall read as follows:
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`The corporation shall not be governed by Section 203 of the Delaware
General Corporation Law.' "
Wyser-Pratte is proposing that stockholders adopt an amendment to the
By-laws electing not to be governed by Section 203 of the Delaware General
Corporation Law (the "Business Combination Statute").
The Business Combination Statute provides, in effect, that if any person
acquires beneficial ownership of 15% or more of the Company's outstanding shares
(thereby becoming an "Interested Shareholder"), the Interested Shareholder may
not engage in a business combination with the Company for three years
thereafter, subject to certain exceptions. Among the exceptions are (i) the
Board's prior approval of such acquisition; (ii) the acquisition of at least 85%
of the Company's shares (subject to certain exclusions) in the transaction in
which such person becomes an Interested Shareholder; and (iii) the approval of
such business combination by 66 2/3% of the outstanding stock not owned by the
Interested Shareholder. The Company's shareholders may, by a vote of a majority
of the outstanding shares, adopt an amendment to the By-laws or Certificate of
Incorporation electing not to be governed by the Business Combination Statute.
Such amendment would become effective twelve months after adoption and would not
be subject to amendment by the Board and would not apply to a business
combination with a person who became an Interested Shareholder prior to the
adoption of such amendment.
THE FOREGOING IS A SUMMARY OF THE BUSINESS COMBINATION STATUTE AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE HERETO. THE TEXT OF THE BUSINESS COMBINATION
STATUTE IS ATTACHED HERETO AS EXHIBIT B.
While the proposed By-law could facilitate a business combination with a
15% or greater shareholder, whether or not the transaction was advantageous for
shareholders, Wyser-Pratte believes that the adoption of this By-law is in the
best interests of shareholders because the Business Combination Statute
discourages offers to acquire the Company's shares; and Wyser-Pratte believes
that the Company's Certificate of Incorporation and the Delaware "entire
fairness" doctrine provides more than adequate protection of the interests of
the other shareholders in a business combination with a controlling shareholder.
The Business Combination Statute discourages offers to acquire the
Company's shares, in Wyser-Pratte's opinion, by creating obstacles to
second-stage mergers in which successful offerors acquire the remainder of the
Company's shares. The Business Combination Statute has this effect because it
requires the offeror to win the votes of a two-thirds super-majority of the
minority shareholders to approve a second-stage merger unless the offeror
acquired at least 85% of the Company's shares (subject to certain exclusions) in
the transaction in which the offeror became an Interested Shareholder or unless
such transaction was approved by the Board of Directors.
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Wyser-Pratte believes that the Company's minority shareholders do not
require the protection of the Business Combination Statute in a second-stage
merger because Article Sixth of the Company's Certificate of Incorporation
provides that an 80% super-majority vote would be required to approve any
second-stage merger with "any corporation, person or entity that is the
beneficial owner, directly or indirectly, of 5% or more of the outstanding
shares of any class or series of voting stock" of the Company (a "5% Holder").
As further protection to the minority shareholders, Article Sixth of the
Company's Certificate of Incorporation also requires the affirmative vote
or consent of a majority of all voting stock of the Company exclusive of all
voting stock of the Company of which such 5% Holder is, directly or indirectly,
a beneficial owner, in order to approve such transaction.
Wyser-Pratte believes that the Company's minority Stockholders also are
protected in a second-stage merger because under Delaware law a second-stage
merger with a controlling shareholder would have to satisfy the entire fairness
test. This test requires the courts to conduct a comprehensive review of the
fairness of such a transaction. Its scope has been described by the Delaware
Supreme Court in Weinberger v. UOP, Inc.: "The concept of fairness has two basic
aspects: fair dealing and fair price. The former embraces questions of when the
transaction was timed, how it was initiated, structured, negotiated, disclosed
to the directors, and how the approvals of the directors and shareholders were
obtained. The latter aspect of fairness relates to the economic and financial
considerations of the proposed merger, including all relevant factors: assets,
market value, earnings, future prospects, and any other elements that affect the
intrinsic or inherent value of a company's stock."
PROPOSAL TO REPEAL ANY BYLAWS ADOPTED BY THE BOARD OF DIRECTORS SINCE
NOVEMBER 1, 1997
(ITEM 6 ON PROXY CARD)
SHAREHOLDERS ARE ASKED TO CONSIDER AND VOTE UPON THE PROPOSAL TO REPEAL ANY
BYLAWS ADOPTED BY THE BOARD OF DIRECTORS SINCE NOVEMBER 1, 1997:
"RESOLVED, that any By-laws adopted by the board of directors since
November 1, 1997 be, and they hereby are, repealed."
The purpose of this proposal is to prevent the board from interfering with
the implementation of the being voted upon by the shareholders at this Annual
Meeting.
REQUIRED VOTE
Under Section 13 of the Bylaws, the affirmative vote of a majority of
the outstanding shares of Common Stock is required to adopt the amendments to
the Bylaws being proposed by Wyser-Pratte. With respect to abstentions and
broker non-votes, the shares will be considered present at the Annual Meeting,
but since they are not affirmative votes for the By-law, they will have the same
effect as votes against the proposals.
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PROPOSAL TO ADOPT A RESOLUTION RECOMMENDING TO THE BOARD THAT THE COMPANY
REIMBURSE WYSER-PRATTE'S EXPENSES IN CONNECTION WITH THIS PROXY SOLICITATION
(ITEM 7 ON PROXY CARD)
SHAREHOLDERS ARE ASKED TO CONSIDER AND VOTE UPON THE PROPOSAL TO ADOPT A
RESOLUTION RECOMMENDING TO THE BOARD THAT THE COMPANY REIMBURSE WYSER-PRATTE'S
EXPENSES IN CONNECTION WITH THIS PROXY SOLICITATION:
"RESOLVED, that the shareholders recommend to the board that the Company
reimburse all of Guy Wyser-Pratte's expenses (including any litigation expenses)
in connection with the solicitation of proxies for this shareholders meeting."
The purpose of the proposals being made by Wyser-Pratte at this Annual
Meeting is to advance shareholder interests. Therefore, he believes that his
expenses in connection with the proxy solicitation (including any litigation
expenses) should be reimbursed. Wyser-Pratte estimates that his expenses
incurred through ------, 1998 are $------- and that his total expenses will be
$-------.
One of the bylaws being proposed by Wyser-Pratte would require a unanimous
board vote or shareholder approval for the board to spend any funds on a proxy
contest with a shareholder unless the board agreed to reimburse the
shareholder's expenses if any of the shareholder's proposals were approved by
the holders of 10% of the shares. However, this proposal will not assist
Wyser-Pratte in getting his expenses in the current proxy contest reimbursed,
because this proposal will only operate prospectively.
The proposed resolution is precatory and will not bind the board of
directors.
Adoption of the proposal requires the affirmative vote of a majority of
the shares present in person or represented by proxy at a meeting at which a
quorum is present. A majority of the outstanding shares, present in person or
represented by proxy, constitute a quorum.
If the board does not reimburse Wyser-Pratte's expenses, he intends to seek
a court order requiring the board to reimburse these expenses, because of the
benefits conferred on the Company's shareholders.
PROPOSAL TO ELECT GUY P. WYSER-PRATTE TO THE BOARD OF DIRECTORS
(ITEM 8 ON PROXY CARD)
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[Four] directors will be elected at the 1998 Annual Meeting to a
three-year term ending at the 2001 Annual Meeting (or until their respective
successors are duly elected and qualified). The four directors will be elected
by a plurality of the votes cast.
Guy P. Wyser-Pratte has been nominated as a director and is soliciting
proxies to vote for his election. Under the Company's system of cumulative
voting, mandated by the certificate of incorporation, each share will have four
votes, which can be divided among the candidates or all cast for a single
candidate. Wyser-Pratte is seeking proxies with cumulative voting instructions
to cast four votes per share for Mr. Wyser-Pratte. If Mr. Wyser-Pratte received
four votes per share from all shareholders voting for him, he could be elected
by shareholders holding as little as 20% of the shares voted, plus one share.
Mr. Wyser-Pratte believes that the board of directors should seek to
maximize shareholder value through a sale of the Company. He also believes that
the board's response to the UPR offer shows that the present board is not
committed to that goal. Mr. Wyser-Pratte believes that his election to the board
would improve the chances that the Company would enter into a value-maximizing
transaction, although at least initially there would not be a majority of
directors who share Mr. Wyser-Pratte's views. If he were elected, and the
shareholders adopted the bylaw requiring a unanimous vote for Defensive Actions,
Mr. Wyser-Pratte would cast his vote to prevent the board from taking Defensive
Actions unless they were part of a strategy to maximize shareholder value.
If the bylaw were not adopted, Mr. Wyser-Pratte believes that he could
still be effective as a director by pressing the board to negotiate and give
serious consideration to premium acquisition proposals.
Wyser-Pratte, 57, is President of WPC and Wyser-Pratte Management
Co., Inc. He serves on the Board of Directors of Comsat Corporation, Maurel et
Prom S.A., and the International Rescue Committee, a non-governmental
international refugee organization. He also serves as a trustee of the U.S.
Marine Corps University Foundation.
CERTAIN INFORMATION CONCERNING
WYSER-PRATTE
AND OTHER PARTICIPANTS
IN THE SOLICITATION
Wyser-Pratte is President and Chief Executive Officer of Wyser-Pratte
Management Company and WPC, which are principally engaged in money management
and event arbitrage. The principal executive offices of WPC are located at 63
Wall Street, New York, New York 10005. Wyser-Pratte owns beneficially 451,500
shares of the Common Stock, representing approximately 0.95% of the 47,486,431
shares of Common Stock outstanding as of October 31, 1997, as reported in the
Company's Quarterly Report on Form 10-Q for the quarter ended September 30,
1997. This includes shares owned directly by Wyser-Pratte and shares owned by
investment partnerships and other managed accounts for which affiliates of WPC
are the general
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partner or investment manager. Neither WPC nor Wyser-Pratte has any voting or
investment power or authority with respect to shares of Common Stock held in
such accounts. Both Wyser-Pratte and WPC disclaim beneficial ownership of such
shares. Certain information about the directors and executive officers of WPC is
set forth in Schedule I attached hereto. Other than Wyser-Pratte, no other
officer of WPC owns any shares of Common Stock.
Except as set forth in this Proxy Statement or in the Appendices hereto,
to the best knowledge of Wyser-Pratte, none of Wyser-Pratte, any of the persons
participating in this solicitation on behalf of Wyser-Pratte, and any associate
of any of the foregoing persons (i) owns beneficially, directly or indirectly,
or has the right to acquire, any securities of the Company or any parent or
subsidiary of the Company, (ii) owns any securities of the Company of record but
not beneficially, (iii) has purchased or sold any securities of the Company
within the past two years, (iv) has incurred indebtedness for the purpose of
acquiring or holding securities of the Company, (v) is or has been a party to
any contract, arrangement or understanding with respect to any securities of the
Company within the past year, (vi) has been indebted to the Company or any of
its subsidiaries since the beginning of the Company's last fiscal year or (vii)
has any arrangement or understanding with respect to future employment by the
Company or with respect to any future transactions to which the Company or any
of its affiliates will or may be a party. In addition, except as set forth in
this Proxy Statement or in the Appendices hereto, to the best knowledge of
Wyser-Pratte, none of Wyser-Pratte, any of the persons participating in this
solicitation on behalf of Wyser-Pratte, and any associate or immediate family
member of any of the foregoing persons has had or is to have a direct or
indirect material interest in any transaction with the Company since the
beginning of the Company's last fiscal year, or any proposed transaction, to
which the Company or any of its affiliates was or is a party.
VOTING RIGHTS
According the Company's Quarterly Report on Form 10Q for the quarter
ended September 30, 1997, at October 31, 1997, 47,486,431 shares of Common Stock
were outstanding and entitled to vote. Only holders of record as of the close of
business on [_______________], 1998 will be entitled to vote at the Annual
Meeting. Wyser-Pratte intends to vote all shares of Common Stock beneficially
owned by him in favor of the proposal set forth herein.
GENERAL INFORMATION
This Proxy Statement and the accompanying GOLD Proxy Card are first being
made available to shareholders on or about ___________, 1998. Executed Proxies
will be solicited by mail advertisement, telephone, telecopier and in person.
Solicitation will be made by Wyser-Pratte and Eric Longmire, Senior Managing
Director of WPC neither of whom will receive additional compensation for such
solicitation. Proxies will be solicited from individuals, brokers, banks, bank
nominees and other institutional holders. Wyser-Pratte has requested banks,
brokerage houses and other custodians, nominees and
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fiduciaries to forward all solicitation materials to the beneficial owners of
the shares they hold of record. Wyser-Pratte will reimburse these record holders
for their reasonable out-of-pocket expenses.
In addition, Wyser-Pratte has retained The Proxy Solicitor to solicit
proxies in connection with the Annual Meeting for which The Proxy Solicitor will
be paid a fee of approximately $______ and will be reimbursed for its reasonable
expenses. The Proxy Solicitor will employ approximately people in its efforts.
Costs incidental to this solicitation include expenditures for printing,
postage, legal and related expenses and are expected to be approximately ______.
The total costs incurred to date in connection with this solicitation are not in
excess of $______.
If the Shareholder Rights By-law is adopted, or the Board adopts a
change in policy or takes other action in response to this solicitation that
increases shareholder value, Wyser-Pratte will ask the Board to have the Company
reimburse him for costs and expenses incurred in connection with this proxy
solicitation. Wyser-Pratte does not intend to request that its reimbursement
request be submitted to a vote of stockholders.
OTHER MATTERS TO BE CONSIDERED
AT THE ANNUAL MEETING
Except as set forth in the Proxy Statement, Wyser-Pratte is not aware of
other matters to be considered at the Annual Meeting. However, if any other
matters properly come before the Annual Meeting, Wyser-Pratte will vote his
Common Stock and all proxies held by him in accordance with his best judgment
with respect to such maters. Your attention is directed to the Company's 1998
Proxy Statement regarding the procedures for submitting proposals for
consideration at the Company's 1999 Annual Meeting.
CERTAIN OTHER INFORMATION REGARDING THE COMPANY
Shareholders are referred to the Company's 1998 Proxy Statement with
respect to the compensation and remuneration paid and payable and other
information related to the Company's officers and directors, beneficial
ownership of the Company's securities.
VOTING OF PROXY CARDS
Shares of Common Stock represented by properly executed GOLD PROXY CARDS
will be voted at the Annual Meeting as marked, and in the discretion of the
persons named as proxies on all other matters as may properly come before the
Annual Meeting, including all motions for an adjournment or postponement of
Annual Meeting, unless otherwise indicated in the Proxy Statement.
IF YOU WISH TO VOTE FOR THE PROPOSAL AND IN THE DISCRETION OF THE
PERSONS NAMED AS PROXIES ON ALL MATTERS AS MAY PROPERLY COME BEFORE THE ANNUAL
MEETING, PLEASE SIGN, DATE
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AND RETURN PROMPTLY THE ENCLOSED PROXY CARD IN THE PROVIDED POSTAGE-PAID
ENVELOPE.
REVOCABILITY OF SIGNED PROXIES
A proxy executed by a holder of the Company's Common Stock may be
revoked at any time before its exercise by sending a written revocation of such
proxy, by submitting another proxy with a later date marked on it or by
appearing in person at the Annual Meeting and voting. A written revocation must
clearly state that the proxy to which it relates is no longer effective and must
be executed and delivered prior to the time that the action authorized by the
executed proxy is taken. The written revocation may be delivered either to
Wyser-Pratte or the Secretary of the Company. Although a written revocation or
later dated proxy delivered only to Pennzoil will be effective, Wyser-Pratte
requests that a written revocation or subsequent proxy also be delivered to
Wyser-Pratte so that he will be aware of such written revocation.
THE RETURN OF A SIGNED AND DATED GOLD PROXY CARD WILL FULLY REVOKE ANY
PREVIOUSLY DATED PROXY YOU MAY HAVE RETURNED. THE LATEST DATED PROXY IS THE ONE
THAT COUNTS.
YOUR VOTE IS IMPORTANT. IT WILL HELP DECIDE WHETHER THE SHAREHOLDERS
WILL HAVE AN ADEQUATE VOICE IN THE AFFAIRS OF THE COMPANY. PLEASE MARK, SIGN AND
DATE THE ENCLOSED GOLD PROXY CARD AND RETURN IT PROMPTLY IN THE PROVIDED
POSTAGE-PAID ENVELOPE.
GUY P. WYSER-PRATTE
IF YOUR SHARES OF PENNZOIL COMMON STOCK ARE HELD IN THE NAME OF A
BROKERAGE FIRM, BANK NOMINEE OR OTHER INSTITUTION, ONLY IT CAN SIGN A PROXY WITH
RESPECT TO YOUR COMMON STOCK. ACCORDINGLY, PLEASE CONTACT THE PERSON RESPONSIBLE
FOR YOUR ACCOUNT AND GIVE INSTRUCTIONS FOR A PROXY CARD TO BE SIGNED
REPRESENTING YOUR SHARES OF COMMON STOCK
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EXHIBIT A
Effective October 28, 1994, the Board of Directors of Pennzoil Company
(the "Company") declared a dividend of one right to purchase preferred stock
("Right") for each outstanding share of the Company's Common Stock, par value
$0.83 1/3 per share ("Common Stock"), to stockholders of record at the close of
business on November 11, 1994. Each Right entitles the registered holder to
purchase from the Company a unit consisting of one one-hundredth of a share (a
"Unit") of Series A Junior Participating Preferred Stock, par value $1.00 per
share (the "Preferred Stock"), at a purchase price of $140 per Unit, subject to
adjustment (the "Purchase Price"). The description and terms of the Rights are
set forth in a Rights Agreement dated as of October 28, 1994 as it may from time
to time be supplemented or amended (the "Rights Agreement") between the Company
and Chemical Bank, as Rights Agent.
Initially, the Rights will be attached to all certificates representing
outstanding shares of Common Stock, and no separate certificates for the Rights
("Rights Certificates") will be distributed. The Rights will separate from the
Common Stock and a "Distribution Date" will occur upon the earlier of (i) ten
days following a public announcement that a person or group of affiliated or
associated persons (an "Acquiring Person") has acquired, or obtained the right
to acquire, beneficial ownership of 15% or more of the outstanding shares of
Common Stock (the date of the announcement being the "Stock Acquisition Date"),
or (ii) ten business days (or such later date as may be determined by the
Company's Board of Directors before the Distribution Date occurs) following the
commencement of a tender offer or exchange offer that would result in a person's
becoming an Acquiring Person. Certain inadvertent acquisitions will not result
in a person's becoming an Acquiring Person if the person promptly divests itself
of sufficient Common Stock. Until the Distribution Date, (a) the Rights will be
evidenced by the Common Stock certificates (together with a copy of a Summary of
Rights or bearing the notation referred to below) and will be transferred with
and only with such Common Stock certificates, (b) new Common Stock certificates
issued after November 11, 1994 will contain a notation incorporating the Rights
Agreement by reference and (c) the surrender for transfer of any certificate for
Common Stock (with or without a copy of the Summary of Rights) will also
constitute the transfer of the Rights associated with the Common Stock
represented by such certificate.
The Rights are not exercisable until the Distribution Date and will
expire at the close of business on October 28, 1999, unless earlier redeemed or
exchanged by the Company as described below.
As soon as practicable after the Distribution Date, Rights Certificates
will be mailed to holders of record of Common Stock as of the close of business
on the Distribution Date and, from and after the Distribution Date, the separate
Rights Certificates alone will represent the Rights. All shares of Common Stock
issued prior to the Distribution Date will be issued with Rights. Shares of
Common Stock issued after the Distribution Date in connection with certain
employee benefit plans or upon conversion of
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certain securities will be issued with Rights. Except as otherwise determined by
the Board of Directors, no other shares of Common Stock issued after the
Distribution Date will be issued with Rights.
In the event (a "Flip-In Event") that a person becomes an Acquiring
Person (except pursuant to a tender or exchange offer for all outstanding shares
of Common Stock at a price and on terms that a majority of the independent
directors of the Company determines to be fair to and otherwise in the best
interests of the Company and its stockholders (a "Permitted Offer")), each
holder of a Right will thereafter have the right to receive, upon exercise of
such Right, a number of shares of Common Stock (or, in certain circumstances,
cash, property or other securities of the Company) having a Current Market Price
(as defined in the Rights Agreement) equal to two times the exercise price of
the Right. Notwithstanding the foregoing, following the occurrence of any
Flip-In Event, all Rights that are, or (under certain circumstances specified in
the Rights Agreement) were, beneficially owned by or transferred to any
Acquiring Person (or by certain related parties) will be null and void in the
circumstances set forth in the Rights Agreement. However, Rights are not
exercisable following the occurrence of any Flip-In Event until such time as the
Rights are no longer redeemable by the Company as set forth below.
For example, at an exercise price of $140 per Right, each Right not
owned by an Acquiring Person (or by certain related parties) following an event
set forth in the preceding paragraph would entitle its holder to purchase $280
worth of Common Stock (or other consideration, as noted above), based upon its
then Current Market Price, for $140. Assuming that the Common Stock had a
Current Market Price of $50 per share at such time, the holder of each valid
Right would be entitled to purchase 5.6 shares of Common Stock for $140.
In the event (a "Flip-Over Event") that, at any time from and after the
time an Acquiring Person becomes such, (i) the Company is acquired in a merger
or other business combination transaction (other than certain mergers that
follow a Permitted Offer), or (ii) 50% or more of the Company's assets or
earning power is sold or transferred, each holder of a Right (except Rights that
previously have been voided as set forth above) shall thereafter have the right
to receive, upon exercise, a number of shares of common stock of the acquiring
company having a Current Market Price equal to two times the exercise price of
the Right. Flip-In Events and Flip-Over Events are collectively referred to as
"Triggering Events." The Purchase Price payable, and the number of Units of
Preferred Stock or other securities or property issuable, upon exercise of the
Rights are subject to adjustment from time to time to prevent dilution (i) in
the event of a stock dividend on, or a subdivision, combination or
reclassification of, the Preferred Stock, (ii) if holders of the Preferred Stock
are granted certain rights or warrants to subscribe for Preferred Stock or
convertible securities at less than the current market price of the Preferred
Stock, or (iii) upon the distribution to holders of the Preferred Stock of
evidences of indebtedness or assets (excluding regular quarterly cash dividends)
or of subscription rights or warrants (other than those referred to above). With
certain exceptions, no adjustment in the Purchase Price will be required until
cumulative adjustments amount to at least 1% of the
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Purchase Price. No fractional Units are required to be issued and, in lieu
thereof, an adjustment in cash may be made based on the market price of the
Preferred Stock on the last trading date prior to the date of exercise. Pursuant
to the Rights Agreement, the Company reserves the right to require prior to the
occurrence of a Triggering Event that, upon any exercise of Rights, a number of
Rights be exercised so that only whole shares of Preferred Stock will be issued.
At any time until ten days following the first date of public
announcement of the occurrence of a Flip-In Event, the Company may redeem the
Rights in whole, but not in part, at a price of $.01 per Right, payable, at the
option of the Company, in cash, shares of Common Stock or such other
consideration as the Board of Directors may determine. Immediately upon the
effectiveness of the action of the Board of Directors ordering redemption of the
Rights, the Rights will terminate and the only right of the holders of Rights
will be to receive the $.01 redemption price.
At any time after the occurrence of a Flip-In Event and prior to a
person's becoming the beneficial owner of 50% or more of the shares of Common
Stock then outstanding, the Company may exchange the Rights (other than Rights
owned by an Acquiring Person or an affiliate or an associate of an Acquiring
Person, which will have become void), in whole or in part, at an exchange ratio
of one share of Common Stock, and/or other equity securities deemed to have the
same value as one share of Common Stock, per Right, subject to adjustment. Until
a Right is exercised, the holder thereof, as such, will have no rights as a
stockholder of the Company, including, without limitation, the right to vote or
to receive dividends. While the distribution of the Rights should not be taxable
to stockholders or to the Company, stockholders may, depending upon the
circumstances, recognize taxable income in the event that the Rights become
exercisable for Common Stock (or other consideration) of the Company or for the
common stock of the acquiring company as set forth above or are exchanged as
provided in the preceding paragraph.
Other than the redemption price, any of the provisions of the Rights
Agreement may be amended by the Board of Directors of the Company as long as the
Rights are redeemable. Thereafter, the provisions of the Rights Agreement may be
amended by the Board of Directors in order to cure any ambiguity, defect or
inconsistency, to make changes that do not materially adversely affect the
interests of holders of Rights (excluding the interests of any Acquiring
Person), or to shorten or lengthen any time period under the Rights Agreement;
provided, however, that no amendment to lengthen the time period governing
redemption shall be made at such time as the Rights are not redeemable.
A copy of the Rights Agreement, specifying the terms of the Rights,
which includes as exhibits the Form of Certificate of Designations of Series A
Junior Participating Preferred Stock, the Form of Rights Certificate and the
Summary of Rights to Purchase Preferred Stock, has been filed with the
Securities and Exchange Commission as Exhibit 1 hereto. A copy of the Rights
Agreement is available free of charge from the Company. This summary description
of the Rights does not purport to be complete and is
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qualified in its entirety by reference to the Rights Agreement, which is
incorporated herein by reference.
The Rights will have certain anti-takeover effects. The Rights will
cause substantial dilution to any person or group that attempts to acquire the
Company without the approval of the Company's Board of Directors. As a result,
the overall effect of the Rights may be to render more difficult or discourage
any attempt to acquire the Company even if such acquisition may be favorable to
the interests of the Company's stockholders. Because the Company's Board of
Directors can redeem the Rights or approve a Permitted Offer, the Rights should
not interfere with a merger or other business combination approved by the Board
of Directors of the Company.
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EXHIBIT B
203 BUSINESS COMBINATIONS WITH INTERESTED STOCKHOLDERS.
(a) Notwithstanding any other provisions of this chapter, a corporation shall
not engage in any business combination with any interested stockholder for a
period of 3 years following the time that such stockholder became an interested
stockholder, unless:
(1) prior to such time the board of directors of the corporation
approved either the business combination or the transaction which resulted
in the stockholder becoming an interested stockholder, or
(2) upon consummation of the transaction which resulted in the
stockholder becoming an interested stockholder, the interested stockholder
owned at least 85% of the voting stock of the corporation outstanding at
the time the transaction commenced, excluding for purposes of determining
the number of shares outstanding those shares owned (i) by persons who are
directors and also officers and (ii) employee stock plans in which employee
participants do not have the right to determine confidentially whether
shares held subject to the plan will be tendered in a tender or exchange
offer, or
(3) At or subsequent to such time the business combination is
approved by the board of directors and authorized at an annual or special
meeting of stockholders, and not by written consent, by the affirmative
vote of at least 66 2/3% of the outstanding voting stock which is not owned
by the interested stockholder.
(b) The restrictions contained in this section shall not apply if:
(1) the corporation's original certificate of incorporation contains
a provision expressly electing not to be governed by this section;
(2) the corporation, by action of its board of directors, adopts an
amendment to its bylaws within 90 days of the effective date of this
section, expressly electing not to be governed by this section, which
amendment shall not be further amended by the board of directors.
(3) the corporation, by action of its stockholders, adopts an
amendment to its certificate of incorporation or bylaws expressly electing
not to be governed by this section, provided that, in addition to any other
vote required by law, such amendment to the certificate of incorporation or
bylaws must be approved by the affirmative vote of a majority of the shares
entitled to vote. An amendment adopted pursuant to this paragraph shall be
effective immediately in the case of a corporation that both (i) has never
had a class of voting stock that falls within any of the three categories
set out in subsection (b)(4) hereof, and (ii) has not elected by a
provision in its original certificate of incorporation or any amendment
thereto to be governed by this section. In all other cases, an amendment
adopted pursuant to this paragraph shall not be effective until 12 months
after the adoption of such amendment and shall not apply to any business
combination between such corporation and any person who became an
interested stockholder of such corporation on or prior to such adoption. A
bylaw
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amendment adopted pursuant to this paragraph shall not be further amended
by the board of directors;
(4) the corporation does not have a class of voting stock that is
(i) listed on a national securities exchange, (ii) authorized for quotation
on The NASDAQ Stock Market or (iii) held of record by more than 2,000
stockholders, unless any of the foregoing results from action taken,
directly or indirectly, by an interested stockholder or from a transaction
in which a person becomes an interested stockholder;
(5) a stockholder becomes an interested stockholder inadvertently
and (i) as soon as practicable divests itself of ownership of sufficient
shares so that the stockholder ceases to be an interested stockholder and
(ii) would not, at any time within the 3 year period immediately prior to a
business combination between the corporation and such stockholder, have
been an interested stockholder but for the inadvertent acquisition of
ownership;
(6) the business combination is proposed prior to the consummation
or abandonment of and subsequent to the earlier of the public announcement
or the notice required hereunder of a proposed transaction which (i)
constitutes one of the transactions described in the second sentence of
this paragraph; (ii) is with or by a person who either was not an
interested stockholder during the previous 3 years or who became an
interested stockholder with the approval of the corporation's board of
directors or during the period described in paragraph (7) of this
subsection (b); and (iii) is approved or not opposed by a majority of the
members of the board of directors then in office (but not less than 1) who
were directors prior to any person becoming an interested stockholder
during the previous 3 years or were recommended for election or elected to
succeed such directors by a majority of such directors. The proposed
transactions referred to in the preceding sentence are limited to (x) a
merger or consolidation of the corporation (except for a merger in respect
of which, pursuant to section 251(f) of the chapter, no vote of the
stockholders of the corporation is required); (y) a sale, lease, exchange,
mortgage, pledge, transfer or other disposition (in one transaction or a
series of transactions), whether as part of a dissolution or otherwise, of
assets of the corporation or of any direct or indirect majority-owned
subsidiary of the corporation (other than to any direct or indirect
wholly-owned subsidiary or to the corporation) having an aggregate market
value equal to 50% or more of either that aggregate market value of all of
the assets of the corporation determined on a consolidated basis or the
aggregate market value of all the outstanding stock of the corporation; or
(z) a proposed tender or exchange offer for 50% or more of the outstanding
voting stock of the corporation. The corporation shall give not less than
20 days notice to all interested stockholders prior to the consummation of
any of the transactions described in clauses (x) or (y) of the second
sentence of this paragraph; or
(7) The business combination is with an interested stockholder who
became an interested stockholder at a time when the restrictions contained
in this section did not apply by reason of any paragraphs (1) through (4)
of this subsection (b), provided, however, that this paragraph (7) shall
not apply if, at the time such interested stockholder became an interested
stockholder, the corporation's certificate
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of incorporation contained a provision authorized by the last sentence of
this subsection (b).
Notwithstanding paragraphs (1), (2), (3) and (4) of this subsection, a
corporation may elect by a provision of its original certificate of
incorporation or any amendment thereto to be governed by this section; provided
that any such amendment to the certificate of incorporation shall not apply to
restrict a business combination between the corporation and an interested
stockholder of the corporation if the interested stockholder became such prior
to the effective date of the amendment.
(c) As used in this section only, the term:
(1) 'affiliate' means a person that directly, or indirectly through
one or more intermediaries, controls, or is controlled by, or is under
common control with, another person.
(2) 'associate,' when used to indicate a relationship with any
person, means (i) any corporation, partnership, unincorporated association
or other entity of which such person is a director, officer or partner or
is, directly or indirectly, the owner of 20% or more of any class of voting
stock, (ii) any trust or other estate in which such person has at least a
20% beneficial interest or as to which such person serves as trustee or in
a similar fiduciary capacity, and (iii) any relative or spouse of such
person, or any relative of such spouse, who has the same residence as such
person.
(3) 'business combination,' when used in reference to any
corporation and any interested stockholder of such corporation, means:
(i) any merger or consolidation of the corporation or any direct
or indirect majority-owned subsidiary of the corporation with (A) the
interested stockholder, or (B) with any other corporation, partnership,
unincorporated association or other entity if the merger or
consolidation is caused by the interested stockholder and as a result of
such merger or consolidation subsection (a) of this section is not
applicable to the surviving entity;
(ii) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of transactions),
except proportionately as a stockholder of such corporation, to or with
the interested stockholder, whether as part of a dissolution or
otherwise, of assets of the corporation or of any direct or indirect
majority-owned subsidiary of the corporation which assets have an
aggregate market value equal to 10% or more of either the aggregate
market value of all the assets of the corporation determined on a
consolidated basis or the aggregate market value of all the outstanding
stock of the corporation;
(iii) any transaction which results in the issuance or transfer
by the corporation or by any direct or indirect majority-owned
subsidiary of the corporation of any stock of the corporation or of any
stock of the corporation or of such subsidiary to the interested
stockholder, except (A) pursuant to the exercise, exchange or conversion
of securities exercisable for, exchangeable for or convertible into
stock of such corporation or any such subsidiary which securities
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were outstanding prior to the time that the interested stockholder
became such, (B) pursuant to a merger under Section 251(g) of this
title; (C) pursuant to a dividend or distribution paid or made, or the
exercise, exchange or conversion of securities exercisable for,
exchangeable for or convertible into stock of such corporation or any
such subsidiary which security is distributed, pro rata to all holders
of a class or series of stock of such corporation subsequent to the time
the interested stockholder became such, (D) pursuant to an exchange
offer by the corporation to purchase stock made on the same terms to all
holders of said stock, or (E) any issuance or transfer of stock by the
corporation, provided however, that in no case under (C)-(E) above shall
there be an increase in the interested stockholder's proportionate share
of the stock of any class or series of the corporation or of the voting
stock of the corporation;
(iv) any transaction involving the corporation or any direct or
indirect majority-owned subsidiary of the corporation which has the
effect, directly or indirectly, of increasing the proportionate share of
the stock of any class or series, or securities convertible into the
stock of any class or series, of the corporation or of any such
subsidiary which is owned by the interested stockholder, except as a
result of immaterial changes due to fractional share adjustments or as a
result of any purchase or redemption of any shares of stock not caused,
directly or indirectly, by the interested stockholder; or
(v) any receipt by the interested stockholder of the benefit,
directly or indirectly (except proportionately as a stockholder of such
corporation) of any loans, advances, guarantees, pledges, or other
financial benefits (other than those expressly permitted in
subparagraphs (i)-(iv) above) provided by or through the corporation or
any direct or indirect majority owned subsidiary.
(4) 'control,' including the term 'controlling,' 'controlled by' and
'under common control with,' means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and
policies of a person, whether through the ownership of voting stock, by
contract, or otherwise. A person who is the owner of 20% or more of the
outstanding voting stock of any corporation, partnership, unincorporated
association or other entity shall be presumed to have control of such
entity, in the absence of proof by a preponderance of the evidence to the
contrary. Notwithstanding the foregoing, a presumption of control shall not
apply where such person holds voting stock, in good faith and not for the
purpose of circumventing this section, as an agent, bank, broker, nominee,
custodian or trustee for one or more owners who do not individually or as a
group have control of such entity.
(5) 'interested stockholder' means any person (other than the
corporation and any direct or indirect majority-owned subsidiary of the
corporation) that (i) is the owner of 15% or more of the outstanding voting
stock of the corporation, or (ii) is an affiliate or associate of the
corporation and was the owner of 15% or more of the outstanding voting
stock of the corporation at any time within the 3-year period immediately
prior to the date on which it is sought to be determined whether such
person is an interested stockholder; and the affiliates and associates of
such person;
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provided, however, that the term 'interested stockholder' shall not include
(x) any person who (A) owned shares in excess of the 15% limitation set
forth herein as of, or acquired such shares pursuant to a tender offer
commenced prior to, December 23, 1987, or pursuant to an exchange offer
announced prior to the aforesaid date and commenced within 90 days
thereafter and either (I) continued to own shares in excess of such 15%
limitation or would have but for action by the corporation or (II) is an
affiliate or associate of the corporation and so continued (or so would
have continued but for action by the corporation) to be the owner of 15% or
more of the outstanding voting stock of the corporation at any time within
the 3-year period immediately prior to the date on which it is sought to be
determined whether such a person is an interested stockholder or (B)
acquired said shares from a person described in (A) above by gift,
inheritance or in a transaction in which no consideration was exchanged; or
(y) any person whose ownership of shares in excess of the 15% limitation
set forth herein in the result of action taken solely by the corporation
provided that such person shall be an interested stockholder if thereafter
such person acquires additional shares of voting stock of the corporation,
except as a result of further corporate action not caused, directly or
indirectly, by such person. For the purpose of determining whether a person
is an interested stockholder, the voting stock of the corporation deemed to
be outstanding shall include stock deemed to be owned by the person through
application of paragraph (8) of this subsection but shall not include any
other unissued stock of such corporation which may be issuable pursuant to
any agreement, arrangement or understanding, or upon exercise of conversion
rights, warrants or options, or otherwise.
(6) 'person' means any individual, corporation, partnership,
unincorporated association or other entity.
(7) 'Stock' means, with respect to any corporation, capital stock
and, with respect to any other entity, any equity interest.
(8) 'Voting stock' means, with respect to any corporation, stock of
any class or series entitled to vote generally in the election of directors
and, with respect to any entity that is not a corporation, any equity
interest entitled to vote generally in the election of the governing body
of such entity.
(9) 'owner' including the terms 'own' and 'owned' when used with
respect to any stock means a person that individually or with or through
any of its affiliates or associates:
(i) beneficially owns such stock, directly or indirectly; or
(ii) has (A) the right to acquire such stock (whether such right
is exercisable immediately or only after the passage of time) pursuant
to any agreement, arrangement or understanding, or upon the exercise of
conversion rights, exchange rights, warrants or options, or otherwise;
provided, however, that a person shall not be deemed the owner of stock
tendered pursuant to a tender or exchange offer made by such person or
any of such person's affiliates or associates until such tendered stock
is accepted for purchase or exchange; or (B) the right to vote such
stock pursuant to any agreement, arrangement or understanding;
<PAGE>
<PAGE>
provided, however, that a person shall not be deemed the owner of any
stock because of such person's right to vote such stock if the
agreement, arrangement or understanding to vote such stock arises solely
from a revocable proxy or consent given in response to a proxy or
consent solicitation made to 10 or more persons; or
(iii) has any agreement, arrangement or understanding for the
purpose of acquiring, holding, voting (except voting pursuant to a
revocable proxy or consent as described in item (B) of clause (ii) of
this paragraph), or disposing of such stock with any other person that
beneficially owns, or whose affiliates or associates beneficially own,
directly or indirectly, such stock.
(d) No provision of a certificate of incorporation or bylaw shall require, for
any vote of stockholders required by this section a greater vote of stockholders
than that specified in this section.
(e) The Court of Chancery is hereby vested with exclusive jurisdiction to hear
and determine all matters with respect to this section.
<PAGE>
<PAGE>
SCHEDULE I
INFORMATION CONCERNING DIRECTORS AND EXECUTIVE OFFICERS OF WPC
AND THEIR ADVISORS THAT MAY PARTICIPATE
IN THE SOLICITATION OF PROXIES
The name, business address, and present principal occupation or
employment of each of the directors and executive officers of WPC and its
advisors and certain other employees and representatives of WPC that may
participate in the solicitation of proxies are set forth below. Unless otherwise
indicated, the principal business address of each director or executive officer
of Wyser-Pratte & Co. is, 63 Wall Street, New York, NY 10005.
PARTICIPANT DIRECTORS AND EXECUTIVE OFFICERS OF WPC.
Present Office or Other
Name Principal Occupation or Employment
- ---- ----------------------------------
Guy P. Wyser-Pratte President
Eric Longmire Senior Managing Director
<PAGE>
<PAGE>
SCHEDULE II
The following sets forth the name, business address and the number of
shares of Common Stock of the Company owned beneficially by the participants in
this solicitation of proxies, or their associates. No shares are held of record
but not beneficially by the participants or their associates.
<TABLE>
<CAPTION>
Number of Shares of Common
Name & Stock Beneficially Owned
Business Address (November ___, 1997) Percent of Common Stock
---------------- -------------------- -----------------------
<S> <C> <C>
Guy P. Wyser-Pratte
Wyser-Pratte & Co., Inc.
63 Wall Street
New York, New York 10005 451,500 <1%
</TABLE>
<PAGE>
<PAGE>
SCHEDULE III
The following tables set forth information with respect to all
purchases and sales of Common Stock of the Company by Wyser-Pratte and his
affiliates during the past two years. Except as set forth below, no participant
in this solicitation has purchased or sold securities of the Company within the
past two years.
- --------------------------------------------------------------------
DATE NO. OF SHARES PURCHASED/(SOLD)
- --------------------------------------------------------------------
- --------------------------------------------------------------------
6/23/97 100
- --------------------------------------------------------------------
6/27/97 13,000
- --------------------------------------------------------------------
6/30/97 30,000
- --------------------------------------------------------------------
7/2/97 107,000
- --------------------------------------------------------------------
7/8/97 161,000
- --------------------------------------------------------------------
7/25/97 8,300
- --------------------------------------------------------------------
7/28/97 1,000
- --------------------------------------------------------------------
8/1/97 8,550
- --------------------------------------------------------------------
8/7/97 3,000
- --------------------------------------------------------------------
8/20/97 112,900
- --------------------------------------------------------------------
8/29/97 29,200
- --------------------------------------------------------------------
8/1/97 (8,550)
- ---------------------------- ---------------------------------------
10/06/97 (13,000)
- --------------------------------------------------------------------
10/30/97 (1,000)
- --------------------------------------------------------------------
<PAGE>
<PAGE>
GOLD PROXY
PENNZOIL COMPANY
ANNUAL MEETING OF SHAREHOLDERS -- , 1998
THIS PROXY IS SOLICITED BY GUY P. WYSER-PRATTE
IN OPPOSITION TO THE PENNZOIL BOARD OF DIRECTORS
The undersigned shareholder of Pennzoil Company ("Pennzoil") hereby
appoints _____, _____ and _____, each of them with full power of substitution,
to vote all shares of Common Stock, par value $0.83-1/3 per share, of Pennzoil
that the undersigned is entitled to vote if personally present at the 1998
Annual Meeting of Shareholders of Pennzoil to be held on , 1998, and
at any adjournments or postponements thereof as indicated below and in the
discretion of the proxies, to vote upon such other business as may properly
come before the meeting, and any adjournment or postponement thereof. The
undersigned hereby revokes any previous proxies with respect to matters
covered by this Proxy.
MR. WYSER-PRATTE RECOMMENDS A VOTE FOR PROPOSALS 1 THROUGH 8.
1. To amend the by-laws to set a time limit on the Board's use of the "Poison
Pill" against certain offers unless shareholders approve such continued use.
FOR AGAINST ABSTAIN
2. To amend the by-laws to require a unanimous vote of the directors to approve
"defensive actions" by the board unless shareholders approve such actions.
FOR AGAINST ABSTAIN
3. To amend the by-laws to allow the holders of 10% of the shares to call a
special meeting of shareholders and to increase the ability of shareholders to
make proposals and to nominate directors at shareholder meetings.
FOR AGAINST ABSTAIN
4. To amend the by-laws to prevent the board from changing any of the by-laws
adopted by the shareholders at this annual meeting.
FOR AGAINST ABSTAIN
5. To amend the by-laws to elect not to be governed by the Business Combination
Statute.
FOR AGAINST ABSTAIN
6. To repeal any by-laws adopted by the board of directors since November 1,
1997.
FOR AGAINST ABSTAIN
7. To adopt a resolution recommending to the board that the Company reimburse
Wyser-Pratte's expenses in connection with this proxy solicitation.
FOR AGAINST ABSTAIN
8. To elect Guy P. Wyser-Pratte to the board of directors.
FOR nominee WITHHOLD AUTHORITY for nominee
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER MARKED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO MARKING IS MADE, THIS PROXY WILL BE DEEMED TO
BE A DIRECTION TO VOTE FOR PROPOSALS 1 THROUGH 8 AND IN THE DISCRETION OF THE
PROXIES, TO VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
MEETING, AND ANY ADJOURNMENT OR POSTPONEMENT THEREOF.
------------------------------------
(Date)
------------------------------------
(Signature)
-------------------------------------
(Title)
------------------------------------
(Signature, if held jointly)
When shares are held by joint tenants, both should sign. When signing an
attorney, executor, administrator, trustee, guardian, corporate officer or
partner, please give full title as such. If a corporation, please sign in
corporate name by President or other authorized officer. If a partnership,
please sign in partnership name by authorized person. This Proxy votes all
shares held in all capacities.
PLEASE MARK, SIGN, DATE AND MAIL PROMPTLY
<PAGE>
<PAGE>
IMPORTANT
Your proxy is important. No matter how many shares you own,
please give Wyser-Pratte your proxy FOR approval of the Wyser-Pratte Resolution
by:
MARKING the enclosed GOLD Annual Meeting proxy card,
SIGNING the enclosed GOLD Annual Meeting proxy card,
DATING the enclosed GOLD Annual Meeting proxy card and
MAILING the enclosed GOLD Annual Meeting proxy card TODAY in the
envelope provided (no postage is required if mailed in the United
States).
If you have already submitted a proxy to Pennzoil for the Annual
Meeting, you may change your vote to a vote FOR the Wyser-Pratte Resolution by
marking, signing, dating and returning the enclosed GOLD proxy card for the
Annual Meeting, which must be dated after any proxy you may have submitted to
Pennzoil. Only your latest dated proxy for the Annual Meeting will count at such
meeting.
If you have any question or require any addition information concerning this
Proxy Statement or the proposals by Wyser-Pratte, please contact The Proxy
Solicitor at the address and telephone number set forth below.
IF ANY OF YOUR SHARES ARE HELD IN THE NAME OF A BROKERAGE FIRM, BANK, BANK
NOMINEE OR OTHER INSTITUTION, ONLY IT CAN VOTE SUCH SHARES AND ONLY UPON RECEIPT
OF YOUR SPECIFIC INSTRUCTIONS. ACCORDINGLY, PLEASE CONTACT THE PERSON
RESPONSIBLE FOR YOUR ACCOUNT AND INSTRUCT THAT PERSON TO EXECUTE THE GOLD ANNUAL
MEETING PROXY CARD.
